August 7, 2019

Is your bank in a box holding you back?

Megabanks continuous software delivery bank in a box

Nearly 10 years ago, banking became something we did through our devices rather than a place we went. The largest banks (Megabanks) and fintechs in the U.S. began investing vast amounts of money into technology to digitally seize market position from community and regional financial institutions (FIs).

When FIs without deep pockets or partners searched for solutions, they found digital banking technology providers offered slow, closed, siloed, and inefficient solutions. With little choice, FIs with limited technology talent relied on a bank in a box: bundled services from their core provider including payments, loan origination, and digital banking. FIs’ core technology provider typically provided these turnkey platforms.

Now that almost half of Americans bank from their phones, FIs continue to rely on these platforms to bring them closer to their users. But as more sophisticated digital banking solutions become available, FIs are being forced to ask if their bank in a box is holding them back.

Is your bank in a box holding you back?

Outgrowing the “Bank in a Box” Solution

We estimate that 70 to 80 percent of FIs below $100 billion in assets count on a digital banking technology provider to support their digital strategies in a white-label way. Smaller FIs of this group typically partner with a legacy digital banking provider.

This approach was appealing because FIs could get all solutions in one place with no worries about transitioning cores. In the early days of digital banking, the bank-in-a-box approach also helped FIs lower operating costs, but it has not continued to reduce them.

What was once a benefit of these legacy providers is now a drawback for future-focused FIs. Having a single vendor for all solutions once meant convenience, but now it reflects limited flexibility and extensibility. If FIs using this kind of digital banking solution don’t find specific products for present or future needs, they’re out of luck for at least the length of their contract.

What’s Possible Outside the Box

In the face of flexible modern digital banking solutions that can scale with FIs into the future, a bank-in-the-box solution is less practical. Banks can now experience continuous software delivery that legacy vendors can’t provide.

Most digital banking platform providers don’t and can’t guarantee when their mobile or desktop experience will be up to date. There’s no loyalty to existing customers as new customers get the latest version first.

Getting necessary updates has typically meant waiting in line or haggling to accelerate requested updates. What causes this problem is delivering a digital banking experience via a variety of legacy code bases. Core providers, for instance, release minimal updates annually.

With a single-code base and proven system architecture of continuous innovation, user needs are anticipated and quickly met so FIs can adapt quickly and users stay engaged.

To compete against the Megabanks and their technology investments, FIs need a true multi-tenant, single instance, configurable, and extensible cloud-platform that enables continuous and secure delivery of innovations.

Banks know what’s at stake for the future, but fear of transition keeps some from modernizing their business. With a digital banking partner that has prioritized security and is ahead of the technology curve, converting to a new platform is simpler and less risky than perceived.

But above all concerns for leaving the bank-in-a-box model behind is staying relevant and competitive. FIs wanting to transition will find that the qualities of a competitive FI have changed since the days of bank-in-a-box convenience.

That means your next technology partner needs to help navigate the new competitive landscape to truly go all in on digital banking.

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