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Customers are the reason why businesses exist. And if the business can’t keep up with the ever-changing demands of its customers, they’re left behind.
The global fintech market is expected to reach $ 332.5 billion by 2028
This is especially relevant for financial services, where legacy processes and technologies often hinder innovation and progress.
Open banking and the transition to an “as-a-service” model have spawned many new fintechs that offer the lustrous and innovative features customers desire. Banks are increasingly interested in B2B fintech to take advantage of new business models, faster transformations and advanced technologies, and the global fintech market is expected to reach $ 332.5 billion by 2028. It is natural to be done.
However, most of the data that drives FinTech’s capabilities requires integration with legacy systems hosted by banks and other financial services institutions. This can lead to some unique integration challenges.
The main challenge is the difference between culture and working style. Large banks are tightly regulated and have vast operations and systems that are far from FinTech’s agile cloud-based approach, which inevitably impacts the coordination of these organizations.
At a recent KPMG panel event, Lloyds Banking Group Engineering Director Alan Woodcock explained the role of education in solving this problem.
Banks are responsible for educating FinTech about the regulatory environment, the prevalence of FinTech within banks, and how it changes with products and departments. Sharing knowledge is between banks and FinTech. It helps to adjust for a common purpose and adjust the pace, “he said.
At the same event, Conrad Ford, Chief Product Officer at Allica Bank, said the problem was that large financial institutions usually wanted to get everyone involved. He explained that if many are involved in a decision, there is a perception that it is less risky, but that is not the case.
He commented: This leads to a culture where people aren’t accountable. Instead, large banks need small, cross-departmental teams to move things forward. Not only is accountability clear, but implementation speeds up. “
On the technology side, data models are a major cause of incompatibilities because FinTech is difficult to integrate with banking systems. This can range from defining good IT service operations to ensuring that banks have the right IT skills to implement and implement technology.
In reality, the implementation process can be tedious if FinTech frequently promotes “plug and play” solutions.
To facilitate the onboarding journey and enable faster practical solutions, Ford insisted on the termination of the Request for Proposal (RFP).
“RFPs are the worst way to choose a technology solution. The starting point for choosing a fintech supplier is to ask,” Is it doing what we want? ” If so, it may pass the confirmation due diligence required by the RFP in advance. “
“Banks need to focus on proof-of-concepts before deciding if there are any gaps that need to be addressed,” he added.
Legacy systems are often ball and chain for large banks. Their complexity and lack of understanding of the IT team’s older systems can be an obstacle in integrating FinTech technology.
However, legacy technology can also be seen as an advantage. According to Woodcock, legacy technology offers many opportunities to work with FinTech.
There are several ways to get around legacy technology. With multiple working environments, we can collaborate with FinTech without causing security issues. We are increasingly because it is our opportunity space. We are working more on legacy systems with our partners, “he said.
Balancing risk and regulatory requirements without interrupting FinTech use is another issue that banks are addressing. However, modern working methods such as Agile can fix this issue.
Ford explains: The best way for banks to work with FinTech is to form a small, authoritative team.
We have seen many high-profile system failures where banks have attempted transformation projects, but the latest engagement mechanisms can prevent these disasters and build strong partnerships.
According to the latest report, a record number of fintech transactions will be made in 2021, with a total investment of $ 210 billion, to fintech that can support digital transformation activities from 2021 onwards, especially from Tier 1 banks. Interest has skyrocketed.
As larger banks are partnering with FinTech to achieve effective transformation, there are three questions these organizations should ask to minimize the challenges mentioned above.
It is true that FinTech offers banks far more than technology platforms, but only if these considerations are made first so that the solution can be used in the right way. Without this approach, transformation is destined to move at the snail’s pace.
