Digital Banking Experience: A new answer to the classic ‘build or buy?’ question

Creative digital disruption facing the banking sector is set to continue for several more years, certainly until the last of the high street branches closes its door. But how do both long-established banks and newer competitors not only stay in the game, but emerge victorious? 

It’s all down to one question. One that all banks would have most certainly asked themselves before. Do we build or do we buy? We would challenge those banks to ask this question again but consider a different viewpoint that blends the binary: 'buy for parity, build for competitive advantage’. But what does that look like and how is it achieved when launching a digital banking solution or enhancing the appeal of an existing one? Let’s dive in... 

Buy for Parity

While a fully formed, proven, out-of-the-box digital banking platform is tempting in today’s world of squeezed budgets and tightening regulation, in truth this approach alone quickly results in diminishing returns for those wanting to create viable and attractive digital banking services. 

With off-the-shelf experience also comes garden-variety competitive edge, allowing the bank little scope to differentiate its products and services from those of others. In short, it’s a fast track to blending into the crowd. 

That is not to say productised solutions don’t still play a part in today’s competitive environment. In fact, they are relatively low cost and can allow crucial speed to market, compared to creating an offering from the ground up. The key here is to only buy when you need non-differentiating capabilities that don’t provide unique value for customers. 

Build for Competitive Advantage

Building a digital banking proposition completely from scratch at this stage in the game makes little sense when so many of the features are universal and therefore non-differentiating. Spending unnecessarily to achieve party and reinvesting the wheel is a questionable economic choice.

For any bank, the time, money and expertise needed to create an entirely new digital proposition successfully is substantial and would mean stretching already-overworked IT teams even further. For many building societies, credit unions and smaller regional banks, it would be nigh-on impossible. Any building effort should be spent on providing customers with differentiated capabilities and fantastic customer experience. This means acquiring features at the most pragmatic cost, and more exploration of tools that can make engineers as productive as possible, amplifying efforts.

The Best of Both Worlds

Rather than a wholesale 'buy' or 'build' choice, the bank can choose a combination of approaches. Ideally firms should acquire table-stake features for low cost, that meet strict security and compliance requirements, and accelerate time to market. At the same time they find technology that enables them to build unique capabilities where it competitively differentiates without spending time and money solving complex architecture challenges.

This can be achieved by accessing a library of ‘headless’ universal capabilities essential for every digital bank/finance app, where banks can build a unique UI while leveraging the speed of pre-built components. Having a service layer that isn’t bundled with a presentation layer means that apps can go to market in as little as four to six months, but retain the aesthetic of something fully bespoke. 

These new hybrid ways of building mobile and web banking ‘apps’ are relatively new but offer cash flow-conscious FI’s a best-of-both-worlds approach.