FinTech

The Changing FinTech Landscape

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22 SPOTLIGHT ON BANK PARTNERSHIPS: THE STAYING POWER OF THE BANK PARTNERSHIP MODEL Innovation is at the heart of financial services. Traditionally, banks used one of three models—buy, build, or partner—when some form of technology innovation is identified as a solution to a business need. BUILD. The bank develops a technological solution or capacity itself to meet its specific needs. Building a solution is the best approach when the bank needs to retain the IP inherent in the product's features or its underlying code. Reasons to build a bespoke solution include selling the product to others or needing the most secure option for a core bank operation. This is probably the costliest and most complex option, not least of all because of the need to recruit and retain product engineers and other highly skilled personnel. PARTNER. The bank collaborates with a FinTech, affording it a high-level of customization. With technology solutions, the firm may be a large enterprise with "off-the-shelf" products or a small FinTech focusing on a niche area or using a highly creative approach. For community banks, this is typically the most cost-effective and efficient option. BUY. After reviewing potential vendors and conducting pilot projects, the bank purchases an existing FinTech or technological solution. In very simple terms, it installs a software product on-premise or through the cloud. This is the easiest of the three options, and in most cases it requires the least capital investment, although not all banks will have the resources to acquire a FinTech outright. In some cases, it means the bank cannot customize the product in any significant way and cannot claim any intellectual property rights on it.

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