Technology is a huge driver of change, and its influence on banking is no exception. According to Forbes Advisor, 78% of Americans prefer to bank digitally. Banks are under pressure like never before to keep pace with the rapidly changing demands of the digital age.
At the same time, banks are asked to do more with less—like remain profitable while dealing with increased regulation and competition. The digital transformation of banking has led many institutions to take a closer look at their technology options and whether they should build or buy their bank tech stack.
Just five to 10 years ago, buying a tech stack was not an option for banks. An in-house build was virtually the only way to have a customized solution. And, turning to core providers led to a one-size-fits-all option that failed to meet the specific needs of the financial institution.
What changed? The availability and integration of open APIs.
As banks and fintechs introduced open APIs to their businesses, they changed their ability to connect with other institutions and fintechs. This allowed for banks to create more services, solutions, and products for their consumers. Check out our previous blog post on how to modernize fintech applications with iPaaS and APIs.
Prior to open APIs, banks had to build one-off custom connections with direct VPN access. With the fintech revolution and standardized APIs, banks have multiple options including BaaS providers, integration layers, and new pathways to reach consumers.
Now that banks can buy customized tech stacks, is that the best route?
There are pros and cons to building vs. buying, and the decision ultimately comes down to what makes the most sense for your bank. If you have the internal resources and expertise to build a solution that meets your specific needs, then that may be the best option.
If you lack the necessary internal resources or feel that it would be more efficient and cost-effective to outsource the development, then purchasing an off-the-shelf solution may be the way to go.
When you’re trying to determine the best path for your bank, there are two things you need to consider:
What is your overall strategy? Do you want to grow assets? Or, are you trying to become an attractive acquisition target? Setting your goal helps set a clear path for your bank’s digital transformation.
Understand what pieces need to fall into place to achieve your goal.
Here are some questions to help guide your plan:
Whether you’re building or buying your bank’s tech stack, does the solution solve your problems and does it solve them well?
How successful has this strategy been with other banks?
Does the solution fit every audience and various functions? (For example: Can you apply for a loan on your phone?)
How long do you expect the solution to remain relevant?
There is no one-size-fits-all answer to the build vs. buy question for bank tech stacks. When it comes to technology, banks have a few options: They can build everything in-house, buy everything from a single vendor, or take a hybrid approach of building some things and buying others.
Ultimately, the best way to make a decision is to consult with experts who can help you understand all your options and make the best decision for your specific needs. Core10’s solutions can help you achieve your goals with room to customize and scale as you grow. We’re not just people selling a solution. We’re partners who can meet you where you are on your technical journey. Check out the amazing work we’ve done through open APIs with our partner Encore Bank.
If you’re uncertain of whether your bank needs to build vs. buy your tech stack, let’s talk. Core10 is primed to help you with this decision. Book a free consultation, and we’ll help you determine the best path for your growth plan.