Banks embarking on a digital transformation journey face the tough dilemma of having to choose between building platform components in-house or buying them.

But instead of these two historically binary options, there is a third alternative that combines the best of both worlds: the accelerated build, a new paper by engagement banking platform provider Backbase, says.

The whitepaper, titled Accelerated build: Bridging the build vs. buy gap, introduces the concept of accelerated build, an approach that provides banks with both a quick time-to-market and high degree of customisability.

According to the paper, while building in-house gives financial institutions full control of the required capabilities and a high degree of customisation, allowing them to create innovative, custom-made solutions and potentially stand out from competitors, it is also very costly and time consuming.

Backbase estimates that the total cost of ownership for a basic banking offering built in-house ranges between US$1.2 million to US$1.6 million annually.

The buy option, on the other hand, allows banks to leverage the resources of best-in-class partners and benefit from a faster time-to-market, as well as a more predictable budget.

However, the approach also comes with a number of shortcomings, including the inability to create deeply customised customer experiences, origination/ distribution features, and business functions, such as sales and management.

Critics often claim that bought solutions are cookie-cutter experiences that fail to provide clients with the differentiating elements that make banks stand out from the pack.

The accelerated build approach

Considering these two approaches’ advantages and weaknesses, Backbase argues that the best solution might be by embracing a hybrid strategy and adopting what it calls the accelerated build.

Essentially, the accelerated build involves buying a vendor platform first and then customising it later.

This approach offers the best results by taking the best parts of the build and buy options and creating a hybrid that gives banks speed, flexibility, and customisability, all while minimising risk and cost, it says.

Buying an out-of-the-box offering first provides banks with a strong foundational backbone and accelerates the initial release.

Banks aren’t tech providers and should consider buying some components of their stack off the shelf and outsourcing commodity capabilities to relevant providers that can do it better, Backbase says, focusing instead on value-added activities and products.

When the delivery model grows and the bank has learnt more about its customers, the bank can then start tailoring these solutions to fit its specific needs and extend the options that are missing from the original provider’s solution.

At the end of the whole process, the bank gets a platform with a fully realised, end-to-end value proposition, gained a faster time-to-market and lowered its costs.

Backbase shares the following recommendation of which components it believes banks should buy and build:

A six-dimensional framework approach

To help banks figure out which approach is best for them, Backbase proposes a six-dimensional framework to thoroughly assess an organisation’s objectives and capabilities to determine the most appropriate implementation option:

• The first dimension, Strategic Advantage, covers the bank’s reasoning behind creating a new engagement platform, as well as its digital vision and articulation with its maturity;
• The Criticality to Business dimension focuses on assessing the engagement banking platform’s creation as a business imperative while identifying critical processes and risks associated with implementation;
• The third dimension, Partnership Capacity, aims to understand the bank’s ecosystem, ability to manage partnerships and the marketplace, and aptitude to foster innovation;
• The Delivery Model and Capabilities dimension looks at the bank’s internal capabilities to understand the organisation, the skill depth, and the learning curve;
• Technology Complexity involves considerations of the backbone of the engagement banking vision across all viewpoints, including requirements, technologies, architecture, tooling, integration, and the implementation ecosystem;
• Finally, Cost Advantage involves assessing the total cost of the effort, encompassing the ecosystem setup, as well as the implementation and outgoing costs of creating the engagement banking platform.

Featured image credit: Edited from Freepik