FinTech is fast growing and revolutionizing how customers manage their money, including mobile payments and investment platforms. Banks and financial service companies leverage FinTech to make the services more accessible, convenient, and secure.
One key aspect of the growing technology proliferation in the financial sector is the integration of FinTech into existing financial and banking systems. Fintech adoption can take many forms, including adopting a new payment platform to integrate a Robo-advisor into a bank’s accounting services. Successful FinTech integration encompasses various factors and goals, which have become necessary for banks to drive growth.
From system upgrades to capital needs, here are vital factors banks should consider when integrating finance technology.
Right Time to Core System Upgrades
Currently, most banks and financial institutions are in the process of modernizing their core platforms. Banks and financial institutions must target a tech stack that keeps all operations functional. Since most banking and financial institutions have already undergone digital transformation, the cloud is vital to the industry’s IT infrastructure. However, FIs need to thoroughly evaluate how well the tools and systems fit within the scope, nature, and complexity of the bank’s system.
FinTech integration works best when banks and financial institutions know when to upgrade their core systems.
Upgrades are solutions for platforms to avoid hampering operations and provide a smooth track for day-to-day tasks. Banks and financial institutions can plan integration effectively by identifying timely updates of the tech stacks.
Additional considerations for FinTech integration include governance, delivery practices, and architecture. Operating technology practices around how quickly decisions are approved and product enhancements are equally pivotal and can impact value due to their efficiency during execution.
Hopping onto the Cloud
Cloud is today used beyond merely storage and network. A decade ago, companies regarded the cloud for computing and storage purposes. However, today with the emerging cloud technology, organizations are realizing it as a mode of innovation and experimenting with new ways of operating. Similarly, banks and financial institutions leverage the cloud for various reasons. But, fully integrating FinTech into their system requires a proper migration process, which is a significant challenge and cumbersome. The primary challenges are navigating complex legacy systems, business operating model shifts, redirecting applications and data, reskilling the workforce, and complying with regulations. On the other side, cyber threats are also a risk.
To integrate finance technology, banks will need a decisive strategy to align the process and make it successful using the right tools. As FinTech integration is an investment, banks must analyze the growth potential of migration tech stacks, including the cloud. Product engineers and IT expertise employees can design a roadmap that helps banks to scale the required technology to migrate everything under the cloud to boost the integration of FinTech.
Building strong partnerships over successful FinTech integration is another critical factor to consider. It includes essential collaborations required for the overall integration of FinTech into systems. Strong alliances over finance technology implementation are necessary to access vital resources and expertise. The partnerships can be in any form, such as joint ventures, investments, acquisitions, and strategic alliances.
For such partnerships to be successful over integration, the people involved must clearly understand the financial strengths and weaknesses and their overall goals and objectives, including technology. It is also essential for them to have a strong foundation of trust, as the integration process can be complex and may require a high degree of cooperation and expenditure.
Vital Components for A Successful FinTech Integration
The strength of FinTech integration depends on some fundamental components. The components are the building blocks for setting the FinTech ecosystem across banks and financial institutions to thrive.
Capital or Investment
Banks and financial institutions require sufficient capital for developing and growing their businesses. A certain amount of investment is also needed to bring innovations or implement tech stack to the core operations. While banks look to integrate FinTech into systems successfully, capital plays a vital role that can make or break business developments. Access to capital comes from corporates, private investors, or government. Higher volumes of venture capital investments are vital for a higher FinTech integration. Apart from new integration, scaling up investments for FinTech stacks is essential to keep them updated to the recent versions. Regular updates of tech stacks are also necessary to maintain the consistency of bank processes, include innovations, and refine processes to deliver more customer-centric services.
Demand drives supply in the FinTech space. When there is more demand for integrating tech stacks, the market will rise with a sufficient supply of vendors, which is good news for banks transforming their processes digitally. Demand for FinTech products and services rises from consumers or businesses. That sets a sturdy FinTech integration. So, banks and financial institutions must study customer demand and seek to integrate or upgrade their FinTech stacks. Once it is clear, these institutions can establish a sturdy FinTech ecosystem and strengthen their position in the market.
Policy and regulations are the essential factors impacting the success of FinTech integration. Non-compliance may mean obstacles in successfully integrating suitable FinTech stacks, resulting in a lack of development or irregular updating of applications hindering business operations. Regulators and organizations need to maintain a balance between the effective compilation of terms and business objectives. Also, they need to balance robust control and governance over operations to manage compliance with regulations.
What the FinTech Integration Strategy Should Look Like
There are several finance technology integration strategies, and they should run in parallel.
The first is a legacy integration strategy where IT partnerships should identify their hierarchy in the existing infrastructure. That means companies transforming must ensure retention and growth through collaborations, and technology adoption is not a roadblock for operational areas like finance, marketing, and accounting.
The second strategy is the integration of the FinTech platforms, which provide development opportunities to drive growth. A strategic and in-depth examination of growth potential with FinTech stacks is a vital component for banks to take note of. Product roadmaps are critical levers in scaling the technology to deliver the required growth. To achieve this, banks and financial institutions must develop visions and roadmaps collaboratively.