The most important advantage of any company is a quick response to market changes. Such a response could be considered a fintech development service. This means a quick assessment of the situation, quick decision-making, and, most importantly, their implementation. In current financial products, this is provided by IT, innovation, and digital, which allows players to cream off the market rather than keep up with the trend when it is almost obsolete.
In-House vs External Product
Banks mostly use third-party software. While fintech companies, as a rule, have their own solution, often based on an adapted external product. Banks used to try to write their own software, but they came to the conclusion that it’s inefficient, and it’s easier to use external solutions in terms of costs. And at that time, and even a decade later, this approach was financially justified. But now, in terms of speed of implementation of new changes – things are exactly the opposite.
For example, in today’s fintech development teams, it may take several months to develop and implement an absolute new large-scale functionality. If it is a small thing in an update, such as transferring additional data, it is implemented in one week.
For banks, on the other hand, if you need to expand functionality, you need to turn to an external vendor. And a long process begins: coordination of requirements, sometimes with a detailed requirements specification (a few days to months), temporary and financial evaluation by the provider (a few weeks), agreement of terms and cost at the bank (a few days to weeks), signing the contract and payment (also weeks). And only after that does the development of the solution begin. As a result, a small chip that is made in 2-3 days, in banks stretches for 2-3 months, and in terms of cost, as a rule, it also comes out disproportionately expensive.
Therefore, the presence of a professional development team compared to the solution provided by third-party vendors also affects the flexibility of financial institutions in the implementation of new services and keeping up with trends in the market.
The internal design of software solutions
Self-written software and third-party solutions in banks are a challenge. And even if there is the source code, even if you have specialists who can understand it, it’s still a kind of legacy code, hard to modify, almost unoptimized, plus it’s very poorly suited for new integrations.
And this is quite a common problem. According to a report by Accenture, 39% of bank CEOs cited outdated IT infrastructure as the biggest obstacle to digital transformation, and the cost of upgrading core banking systems as the most significant barrier to the implementation of new technologies.
In turn, fintech companies immediately create their own internal software product based on modern concepts, including rapid change and ramp-up, and this is a big plus for fintech. This requires its own development team, which will create parts of the product, keeping in mind all the necessary functionality. Because it’s hard enough to put together a perfectly working system from parts that weren’t originally designed to work with each other.
These problems and perspectives can be seen even within a modern fintech company. The product itself started out as a so-called monolithic piece of code, which is now being divided into parts. And this happens for the simple reason that it was inconvenient, slow, costly to work with, and there were a lot of bugs.
Fintech in banking
If banks intend to remain competitive, they should adopt a horizontal organizational structure from fintech companies for innovative development teams. Also, with the trend toward customer-centricity, it’s important for such players to change their internal infrastructure.
Since API is already an industry standard that is supported by the regulator, it is time for banks to think about redesigning their architecture. Because from the regulator’s point of view, it is now just as important as meeting financial regulations.
At the same time, you should not blindly copy the approaches of fintech companies, hiring hundreds of developers and refusing third-party solutions, if the bank serves a few hundred thousand clients at best. But it’s worth choosing software solutions and vendors that can ensure speed and flexibility of development. And that will scale effectively on cloud infrastructure.
Integration schemes
If you compare the launch of a fintech product in a new country or even a region with its own regulatory peculiarities and look at the process of opening several new branches in a city, you’ll come to the conclusion that sometimes it’s much better for banks in terms of speed to use existing, ready-made specialized software. Because with all the new service schemes, some of the functionality remains unchanged.
For example, current account management systems, where only the ways of providing access to accounts for customers change. Or anti-fraud systems, which, of course, are constantly being improved to combat new schemes, but don’t get rid of old problems like the use of compromised cards. But there is one nuance – the readiness of your own system and third-party solution for fast integration. And it is closed by having a simple and easy-to-use API, which operates with properly organized abstract entities (rather than internal implementation features) and uses modern approaches for interaction (e.g., REST). With such an API, integration is very easy.
When using this approach to integrate between the two services, you don’t need to write some external connectors on the same side, which when receiving the information will also put everything at once in the database without affecting the current states of the entities.
Choosing fintech software developers
You no longer have to worry about the individual selection of specialists. Thanks to the aligned and balanced composition of the professional development team, they are already ready to work on creating solutions for any modern banking system.
- Team members have worked together on at least 2 projects.
- Teamwork – tasks, quality control, management, etc.
- Team specialization on specific types of tasks.
- Business expertise in specific areas.
A service team is a group of developers who have already worked on banking software and are able to solve specific tasks for banks. Examples: mobile development team, backend development team, frontend development team, microservices/functions development team, etc.
