Most community banks and credit unions aren’t strangers to the concept of open banking. For years, we’ve heard all about how facilitating partnerships with fintechs through APIs will open new doors for customization, efficiency, and competition. The pandemic drove this point home as more consumers turned to mobile and online banking for every service imaginable, from account opening to check deposits.
Despite this, many community banks and credit unions are still missing a key piece of the puzzle: development resources. Who is going to help you take advantage of these possibilities? Whether you choose to build a team in-house or outsource your projects, developers should be considered a key resource for the modern institution.
Generally, we see financial institutions falling into one of two categories. The first is those who have an in-house development team but need the right tools to execute a specific project. In that case, they may just need a consultant to advise their team. The other group is those who have an exciting idea, but don’t have a development team to do it for them, which means they need a team to partner and work with.
There is truly no replacement for a dedicated in-house development team. Having your own team of experts means projects are completed faster and you have visibility into the status of the project. It allows you to lead the competition with innovations. Additionally, a dedicated team means your developers understand your institution’s needs and can customize accordingly. However, building an entire team isn’t always feasible as a first step for smaller institutions. Having at least one full-time employee who understands development and can act as an interpreter between the institution and a development partner can be very helpful in this instance.
Regardless of the strategy you choose, there are a few things to keep in mind:
- Price
How much are you willing to spend to hire someone and/or work with a consultant or development shop, and are your expectations in line with current market value? Keep in mind that a higher per hour cost doesn’t always equal a higher final cost if a particular team is more efficient.
- Value
What is the most cost-effective strategy to achieve your end goal? What are your expectations for what will be delivered based on the price?
- Technical Capability
Does the developer or consultant you’re interested in have the expertise needed to work with your current systems and achieve the desired outcome?
- Design Capability
Do they have good user experience (UX) expertise and the ability to create something that is easy to use?
- Trust
Is this potential partner trustworthy? Do they come with recommendations or positive customer reviews?
- Speed
Can they complete your project quickly and iteratively?
We’ve been talking about open banking and the necessity of smaller financial institutions partnering with innovative fintechs for years, yet we seem closer than ever to reaching the point of no return. More fintechs (and even companies that seem to have nothing to do with banking, like Amazon and Apple) are offering very bank-like services, a situation that has many community banks and credit unions starting to sweat.
Leveraging the power of open banking to partner with fintechs without bringing additional risk to your accountholders is the most scalable and sustainable solution for the rapid innovation we’re seeing today. Unfortunately, many institutions feel stuck with outdated systems. A modern framework with open APIs is critical for the success of community financial institutions, which need the ability to pair leading technology with local, relationship-based services in order to differentiate themselves. Many other platforms use specialized coding language that is not common for the majority of developers, making it difficult to find a qualified partner.
Many of our financial institutions are already taking advantage of this opportunity to implement exciting new ideas. In fact, we heard from two institutions about how they’re leveraging the toolkit in a recent webinar. Whether you’re working with a dedicated in-house team or planning to outsource the entire project, embracing open banking is a critical way for community banks and credit unions to differentiate themselves with customized offerings that pair the relationship-based service they’re known for with leading technology.
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