Our digital world is constantly changing, and it’s up to those of us offering services and technology to keep up and even stay ahead, lest we get swept up by a wave of competition and changing customer demands.
If you read the headline of this blog and decided to click in, you know we’re going to discuss how to determine which of the “latest and greatest” digital platform strategies you should employ for your bank or fintech’s success. But quickly, can we remark on how much innovation is happening in the banking world and how quickly it seems to be occurring?
We all know that on the backend, these developments and steps forward don’t happen overnight, yet there is a need for better, faster (stronger..? Excuse the Daft Punk reference) digital products that meet customer demands. The question at the heart of this need is “what are the actionable paths forward and which one works best with our business goals?”
Three Digital Platform Strategies to Look Out For
There are three key digital strategies we’ll cover in this blog: owning your own platform, joining one that already exists, or “owning a vertical” via a robust end-to-end solution. (Learn more about these strategies from PYMNT.com’s webinar recording, “Embedded & Contextual: Next-Gen Business Banking in 2021.”)
Initially, the price of admission for owning your own platform can sound most extreme (and with the wrong tooling, it definitely can be). Luckily, there are user- and developer-friendly platforms available that don’t require you to build everything completely from scratch. With this in mind, let’s go through some pros, cons, and key use cases for each of these strategies.
Owning Your Own Platform
Owning your own platform means owning your user experience. When a business logs in to check balances or initiate payments, they log into an application you own. For banks especially, this option is attractive because the onus is on you - you can implement the experience you want/your customers need without fear of changes, additions, or deprecations that alter your customer experience.
Banks can take a page out of the books of leading software companies when it comes to employing a platform strategy. With this, making sure that your platform is flexible, robust, and user-oriented is key to success. This could mean offering treasury management integrations with leading ERPs or even offering self-serve integration tooling as a feature set to embolden corporate clients to integrate to their mission-critical systems.
Of course, this murky backend portion of owning your own platform can look like a heavy investment. And honestly? It can be. Fortunately, as more banks go the “own your own” route, more and more vendors offer alternatives (like white-labeling an existing integration platform) to navigate the connectivity complexities that come with doing “own your own” well.
The importance of a repeatable backend architecture for your owned digital platform is also highlighted by how difficult it can be to integrate to ERP/F&A apps like NetSuite. A customer of ours recently mentioned it took a full 12 months to productize one integration to an SMB accounting application, not even a full cloud ERP like NetSuite.
An existing platform (that solves financial use cases like quote-to-cash and procure-to-pay, mind you…) should have pre-built connectors to these mission-critical apps so you can quickly plug them into your digital product and enable standout features like real-time reconciliation.
Joining Someone Else’s Platform
Partnerships and slotting into someone else’s ecosystem is a lower cost, potentially high-yield option for getting your digital product live and in the hands of users. Of course, the big consideration here goes back to the idea of owning the user experience - are you ok with ceding control? How much trust do you have in this platform partner? What does the platform’s roadmap look like and will your digital product continue to play a prominent role? How will your users get access?
A good way to think about this strategy is in terms of contextual services delivery. For example, consider the drivers that elect to get a car loan via the Uber app or those who apply for a mortgage on Zillow. Service providers integrate to these popular channels to boost user acquisition efforts by being in the “right place at the right time” and making signing up for a car loan, for instance, an all-in-one experience that the user can’t pass up.
Another key benefit to this strategy is less upfront dev time and monetary cost. If you’d like to quickly plug your digital banking product into various ecosystems and are ok using a hosted experience owned by someone else, this is a great option.
Of course, it’s critical to make sure you trust this platform partner and that your needs/goals/expectations align with the roadmap and actuality of their platform. Also critical? That you’re ahead of the curve with an API-first design so you’re even able to plug into someone else’s platform.
Controlling Your Vertical End-to-End
This strategy leans heavily toward the build route. Depending on your business goals and the product you offer, it might make more sense to build a deeply integrated solution-specific digital product that addresses a core need.
This means that if you hope to be “the best invoice processing app” in the market, you’ll need to build connectivity to the multitudinous F&As your clients use to enable processes to occur. For example, making it so that your customers can upload, process, and automagically send a digital invoice to the accounting department without once leaving your product.
But to enable this “better than” experience, you need to build out robust connections to a variety of ERP/ F&As. This means discovering the standard and custom objects available at each application’s native endpoint and building integrations according to their peculiarities. The noted difference here is that you aren’t building out integrations to the entirety of NetSuite (like with the “own your own” strategy), but rather to the objects related to its invoice processing backend so you can “be the best” at one specific function.
The big “pro” of this method is less integration work. Less time spent on the initial build means faster time-to-value and lower cost (if your team is aligned on the build or you’ve chosen a worthy third-party vendor to help.)
A glaring con of this method is the cost of maintenance your dev team will incur. You won’t have an iPaaS keeping track of deprecations and changes to the APIs you’re connected to - if something breaks, you need to fix it.
Additionally, if you want to integrate to more apps or add more service-specific end-to-end solutions, your time-to-market will be slower than a similar company that’s already built out one or two integrations using a one-to-many API integration platform. In other words, you’re starting from scratch, whereas with the help of a platform or iPaaS you’re able to rearchitect your connections using repeatable frameworks to get up-and-running quickly.
Making the Platform Strategy Accessible
Quickly looking back at the various digital platform strategies you can choose from, “owning your own” looks like the highest cost (for highest ROI) option out of the three. Fortunately, as more and more FIs revolutionize their digital banking products, more options for owning your platform become available simply due to increased demand.
For backend integration infrastructure (the ugly but necessary behind-the-scenes enabler of a great digital platform), new market entrants arrive seemingly every month and offer a variety of pricing options and different levels of autonomy. The market today boasts many embedded solutions (some control, but not the whole nine-yards) so you can add and build connectivity to a range of apps within your product itself, enabling a seamless, user-friendly platform.
Cloud Elements is different - we offer both an embedded solution and the only white-label option in the industry. Companies like SAP and Axway utilize this format to retain the utmost control of their user experiences. With this option, you can truly “own” your own iPaaS (and get it live in as little as 90 days) for fast time-to-value on your digital platform.
Other Banking Trends in 2021
The question of how to set up your bank or fintech with a successful digital platform strategy is only a piece of the larger puzzle re. changing consumer desires and heightened expectations. Check out our 2021 State of Open Banking Report to discover some of the new practices and technologies we expect to gain traction this year along with a look back at how FI expectations and capabilities have changed in the past few years.