Why are banks buying tech from other banks?

Not long ago, banks were considered the antithesis of innovation, held back by legacy systems and a conservative approach to change. But the neobank revolution challenged that, sparking rapid technological evolution across the industry and recasting financial services business as potential innovators. Now, we’re witnessing a significant shift: banks not only using technology to streamline their own operations but also entering the technology market as suppliers themselves.

Leading this trend are initiatives like Monument Technology, Engine by Starling, and Audax by Standard Chartered in Asia. These “Banking-Platform-as-a-Service” providers are a relatively new phenomenon, yet they are already generating significant market interest. Having served as interim Chief Commercial Officer (CCO) at Monument Technology, I observed firsthand how strong the demand is for tech solutions developed by banks, for banks. Conversations with executives at other leading firms, such as Audax and Starling, echo my personal experience: the appetite for this new category of banking technology is substantial.

The Draw of Banking Technology from Other Banks

What, exactly, is driving this demand? Conversations with potential clients reveal two main reasons.

Firstly, while financial services technology has splintered into smaller and highly specialized solutions, integration complexities remain daunting. For many smaller financial institutions, the talent pool and resources needed to construct a comprehensive, next-generation platform are simply out of reach. In fact, the financial barrier alone is substantial, with a base investment requirement around £20 million—an unfeasible cost for smaller firms.

Secondly, even institutions that possess the necessary capital and technological know-how are wary. Traditionally, tech vendors and system implementers can sometimes find themselves at odds when a project becomes challenging, each tending to point fingers at the other. In these situations, the client ends up stuck in the middle, juggling separate relationships and simply wanting to achieve the outcome they envisioned. A cohesive approach—where one party owns the entire solution—has been notably absent from the landscape until now. Banking-Platform-as-a-Service, by offering integrated, outcome-based solutions, appears to address these challenges.

Delivering Solutions, Not Just Software

The appeal of these new platforms lies in their promise of results. Traditional financial technology providers often require institutions to manage multiple partnerships, from software vendors to implementation teams. However, the Banking-Platform-as-a-Service model lets banks purchase not just software but a fully integrated outcome, reducing both the risk and complexity that accompanies large-scale digital transformation projects.

For institutions, the need to focus on customer experience and core banking functions has never been greater. Building from scratch isn’t a practical option for many, given the speed at which innovation needs to happen today. By leveraging a full-stack Operating System proven in another bank, institutions can leapfrog some of the previous barriers in time and capital commitment required, gaining access to proven technology and a single point of responsibility, driving the accountability that projects of this scale desperately need.

The Long-Term Implications for Banking Technology

The rise of Banking-Platform-as-a-Service marks a paradigm shift with broad implications for the future of financial technology. It challenges the idea that banks and fintech firms operate in entirely separate spheres. As disruptive neobanks step into technology provision, they also broaden the scope of what it means to be a bank today, to create a hybrid ecosystem where FI’s can be both providers and consumers.

The Banking-Platform-as-a-Service model addresses longstanding pain points in the sector, appealing to financial institutions eager, but previously unable, to level-up their digital infrastructure. As demand for such platforms grows, I wonder if we’ll see more banks follow the lead of Monument, Starling, and Audax, heralding a future where the lines between banking and technology continue to blur.