Moving forward with fintech application development Kyle Ferguson is Chief Executive Officer at Fraedom According to a recent survey conducted by Fraedom, legacy systems are proving to be the most common barrier preventing commercial banks from developing fintech applications in-house. The research that collected the views and opinions of shareholders, middle managers and senior managers in commercial banks found that 61% of banks are being held back by this technological heritage. The banking sector has traditionally struggled to make fast technical advancements so in some cases it is hardly surprising that older systems are holding them back. However, with this in mind smaller fintech firms have already started to muscle their way in to help assist retail banks with providing a more comprehensive range of services for consumers. Banks now have the option to negotiate the obstacle of legacy systems through partnering or outsourcing selected services to a fintech provider. Trusted fintech firms are offering banks the chance to reap the benefits from technical applications that can lead to more revenue making opportunities, without taking the large risk of banks taking the step into the unknown alone. However, a shift does appear to be on the horizon with only 26% of commercial banks not outsourcing any services 41% of respondents globally stated that their bank currently outsources payment solutions to fintech partners. This was in comparison to 33% who say they do the same for commercial card management solutions and 26% who claim to do so for expense management solutions. It was also interesting to note that banks are planning to ramp up their fintech investment over the next three years, with 77% of respondents in total believing that fintech investment in their bank would increase. This feeling was especially strong in the US where 82% of the sample stated this belief opposed to 72% of those based in the UK. This period of transition is great news for ambitious fintech firms. Banks are starting to realise that established fintech providers can make a big difference in areas of their business by providing technical expertise as well as in-depth knowledge of local markets. It’s all about selecting key, digital-driven services that will help retain customers and entice new ones. The ability to offer card expenditure and balance transparency can reduce risk and costs for issuing banks. It is a service that can be joined on to an existing business with little overhead costs. This is just one of a number of ways that partnering with fintech firms can bring substantial benefits. This increase in agility also helps banks to speed up service choices and improve customer satisfaction. Forming a partnership can provide banks with a way around the issue of coping with legacy systems and avoid implementation costs. By forming a partnership, outsourcing banks buy in to a product roadmap that will keep their offerings ever relevant as fintechs develop the technology required. The partnering approach is becoming more appealing to commercial banks. They understand their customers value their reliability, trustworthiness and strength of their brand. But increasingly, they also understand the importance of encouraging innovation to remain ahead of the technology curve, while recognising it is not the bread and butter of their business. While legacy systems appear to be the most common factor in preventing banks from creating in-house fintech applications, the study did also reveal that a lack of expertise - recognised by 56% of respondents was also a major stumbling block. To innovate and grow, banks and fintech firms alike must have employees that understand the technology – developers, systems architects and people with a record of solving problems. Taking a forward-thinking approach to recruitment is key. If they want to attract and retain the best talent, organisations need to be listening, adapting and trusting each other to work together to resolve issues and frustrations. We believe all the above elements will become increasingly important in any successful business. Overall, the research represents growing strength within the fintech sector and it is great to see that more banks are beginning to see the value in partnering with a fintech provider. In turn, this is delivering a better service for banks and customers alike and it is a trend that I expect to continue as banks fight to keep on the pulse of technology in the sector.

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If they want to attract and retain the best talent, organisations need to be listening, adapting and trusting each other to work together to resolve issues and frustrations

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