Digital Banking Platform: Buy vs Build vs Buy and Build

Tech giants like Google, Amazon, Facebook, and Apple (GAFA) have set high customer expectations for seamless digital journeys, completed with minimal steps. However, for banks and other financial institutions the challenge lies in choosing the right approach to implement such a platform.

Traditionally, there have been two main options: buying a ready-made solution or building a custom solution in-house. Recently, a new hybrid approach – Buy and Build – has emerged, incorporating the best of both options. Each option has its own set of advantages and challenges. Here’s a closer look at each approach to help banks and other financial institutions make an informed decision.

Buying a Ready-Made Solution

Buying a ready-made solution involves purchasing a digital banking platform from a vendor. This option generally allows companies to go to market faster and can be more cost-effective in the short term. However, it offers limited customisation options.

Advantages:

• Quick deployment: Ready-made solutions can be implemented significantly faster, leading to quicker time to market.
• Proven reliability: These platforms are usually tried and tested, ensuring stability and reliability.
• Support and updates: Vendors typically offer ongoing support, updates, and improvements, ensuring the solution remains current and effective.
• Lower initial costs: Upfront costs are often lower compared to building a custom solution.

Challenges:

• Limited customisation: Off-the-shelf solutions might not perfectly align with an institution’s specific needs or branding. Differentiation from competitors using similar platforms can be challenging.
• Vendor dependency: Companies become reliant on the vendor for updates, support, and potentially for significant customisations, which may come at an additional cost.

Example: Companies might find limited options for integrating a unique loyalty program or a custom user interface design with an off-the-shelf platform.

Building a Custom Solution

Building a custom digital banking platform allows companies to tailor it to their specific needs and preferences. However, this approach can be resource-intensive and requires a long-term commitment.

Advantages:

• Full customisation: The platform can be designed to perfectly match institutions’ unique requirements and branding, fostering a distinct user experience.
• Competitive advantage: A custom-built solution can provide a significant edge over competitors by offering unique features and functionalities tailored to companies’ customer base.
• Greater control: Companies have complete control over the development process and future updates, ensuring the platform evolves with their needs.

Challenges:

• High costs: Development and ongoing maintenance of a custom platform can be expensive, requiring a significant investment.
• Resource-intensive: This approach demands skilled and experienced developers, system architects, project managers, and a dedicated IT team for ongoing maintenance and bug fixes.
• Longer time to market: Developing a custom platform takes considerably longer to deploy compared to buying a ready-made solution.
• Technical debt: Custom development can lead to technical debt, where outdated code becomes difficult and expensive to maintain over time.
• Complexity and Risk: Developing a banking platform in-house comes with high complexity and potential risks associated with project management and technology implementation. Rarely are these projects successful on the first try.

Example: While a custom platform offers superior control and customisation, the development time and ongoing maintenance costs might strain institutions’ resources.

Buy and Build

The Buy and Build approach combines the best of both worlds by offering pre-built features and tools to customise it for the bank’s specific needs. This allows for faster deployment, cost-effectiveness, and a higher degree of customization compared to building entirely from scratch.

Advantages:

• Balanced approach: This method strikes a balance between quick deployment and the ability to tailor the platform to the company’s needs.
• Adaptability: The platform can be easily scaled and adapted to accommodate future growth and changing market demands.
• Cost-Effectiveness: Companies can leverage the cost efficiencies of a pre-built platform while focusing resources on developing unique features that add value to their customers.
• Faster time to market: By combining buying and building, companies can significantly reduce the time to market compared to complete custom development.

Challenges:

• Integration complexity: Integrating and customising a pre-built platform can be a complex task.
• Vendor limitations: Some vendor platforms may have limitations on how extensively they can be customised.
• Professional Services: Some vendors’ platforms can only be customised by relying on the vendor’s development team, which might lead to high costs associated with any customised solution.

Example: With a Buy and Build platform, companies can seamlessly integrate their existing loyalty program and design a unique mobile app that reflects their brand identity, while benefiting from pre-built core functionalities.

Choosing the Right Path

The ideal approach depends on institutions’ specific needs and resources. If speed to market and cost-effectiveness are top priorities, a ready-made solution might be suitable. However, if they need a high degree of customization and control to create an exceptional offering, then building a custom platform is the way to go. The key challenge is to do so cost-effectively. Many banks have ambitious goals but limited resources, making it crucial to maximise value for money.

At Plumery, we combine non-differentiating out-of-the-box capabilities with a pre-built, developer-friendly Application Hosting Platform, addressing the complexities of modern architecture and stringent security and compliance standards. We remove integration complexity by offering 300+ components that enable business process orchestration and integration with any technology, along with a marketplace of pre-integrations with best-in-class ecosystem partners, such as core banking systems, KYC, and AML.

The Buy and Build approach allows banks’ and other financial institutions’ internal developers to swiftly create unique features without grappling with architectural challenges, enabling them to focus on what matters most while leveraging a reliable architecture. Out-of-the-box capabilities, which are unlikely to create any differentiation if built from scratch, are integrated seamlessly to provide a solid foundation.