Creating a fintech blueprint for financial institutions

Financial institutions must consider developing a “fintech blueprint” detailing what they want to accomplish along with the when, how and with whom.  

It’s common for most banks and credit unions to assume they have a “fintech strategy” that can keep pace with the rapid evolution of the financial landscape. The reality is that many of these strategies lack substance and fail to help the FI deploy new, innovative solutions for both internal operations and customer-facing enhancements and engagement. 

The pandemic served as a wake-up call for banks, forcing them to reconsider whether they should refresh their approach. While a shift to digital was inevitable due to regulatory and technological dynamics, the pandemic accelerated this migration with the rapid changes in consumer preferences. 

When developing a fintech blueprint, FIs should understand customer behaviors as well as their current fintech partners and how they could evolve. In the current market, there is a wide range of API-enabled products that institutions can leverage to address various consumer and commercial needs.  

With emerging trends such as open banking, embedded finance and instant payments gaining momentum, there are several considerations for FIs to keep in mind as they start to build out their own fintech blueprint. 

Prioritizing the customer journey 

Banks should consider putting themselves in their customers’ shoes. It’s important to map out the steps a customer might take, along with any touchpoints they may encounter. This could include a decision to open a new account or shop for a mortgage or auto loan. Other examples may include a bank setting up online portal access, a customer making daily deposits into different accounts or how the customer is making bill payments or P2P payments for everyday life activities. 

FIs should then work on aligning their organization with the customer journey. This can involve conducting an employee talent and skills assessment and determining whether the bank should develop platforms in-house, partner with third parties or pursue acquisitions. It may be necessary to conduct a periodic refresh on their fintech landscape to identify how institutions might be falling behind and explore options to eliminate dependencies with incumbent vendors. 

Payments continue to represent one of the dominant user interactions that banks must carefully evaluate. Customers expect to be met with a seamless digital and hybrid experience in settings outside of financial services. 

Selecting a core and ecosystem focus in executing a strategy 

A critical step in the fintech blueprint is selecting a core and ecosystem focus. This involves choosing the right partners and timelines that will help guide the decision-making process along the customer’s journey. When evaluating partners, banks should be diligent about selecting vendor products that are aligned with the envisioned customer journey and their strategic roadmap for capability and technology stack.  

Once a bank’s directions and needs are identified and understood, they should begin setting up their tech strategy by seeking developers and the tech strategy talent required to execute. Since the start of the year, around 190,000 tech workers entered the market following a massive wave of layoffs in the tech sector. This gives FIs a wealth of hiring opportunities that were nonexistent just over a year ago. 

Keep risk and operational readiness top of mind 

FIs must avoid shortchanging risk and operation readiness assessments. This is critical if they are converting from an incumbent core system or implementing any new system or capability that integrates with a bank’s core system. It’s essential to be mindful of risks involved with legacy systems that are not designed to address a wide array of consumer and commercial needs.  

As a bank develops its plans, it must build clearly defined strategies that apply to all new products, business models and channels. Are new customer acquisitions being prioritized? Have ROI and ROA targets been identified? These questions should be asked for any initiative. 

Now more than ever, banks need to assess their strengths and weaknesses in terms of tech functionality and staffing know-how. A proper assessment, followed by a functional fintech blueprint, can help FIs adjust or overhaul their internal structure and reevaluate third-party partnerships along their innovation journey. 

Prakash Natarajan is managing director of payment strategy for SRM.