Why buy is better than build in Digital Banking
A guide to making the right choice to reach your bank’s business goals.
This guide explores 3 key learnings
1. Why buying is (usually) the better option
While building a targeted in-house solution may at first seem simple and cheaper, vendors have distilled the best practices for building and launching a digital bank that delivers against key business outcomes
2. What to look for in a vendor?
We recommend focusing your search around four key considerations: deployment flexibility, legacy agnostic, continuous integration and deployment, a platform-based approach
3. Unlock a treasure chest of customer-facing functionality
The quality of your technology is irrelevant if no one uses it; to achieve your key business outcomes, your solutions must always be grounded in behavioural psychology.
You need a digital bank that customers love
Digital transformation is critical to banking innovation, growth, and competitiveness. According to McKinsey & Co, even lower-level digital capabilities represent a $350 billion opportunity for banks worldwide.
In this environment, the big players are doubling down.
Two-thirds (66%) of leaders agree that the biggest impact on banking in the next five years will come from new technologies, with HSBC and JPMorgan boosting their total technology spend by around $900 million and $2.5 billion respectively compared to 2020.
In this tech race, your digital bank is among your most critical and lucrative advantages—and it’s no surprise global spending on this area is skyrocketing towards $17 billion by 2025.
Operating at the sharp-end of customer engagement, digital channels are crucially important for driving user acquisition, loyalty, and retention—all of which are central to achieving your business and revenue goals. On average, a more satisfied customer brings in 2.4 times greater revenue.
With 63% of customers more willing to try digital applications following the impact of COVID-19, digital customer engagement is more important than ever.
Deloitte has pointed to a poor digital experience as the number one reason for customer churn, while our own research found that 44% of customers have switched banks because of a poor digital experience and that 67% would be more willing to stay with their bank if they enjoyed using its app. These trends will only accelerate in the coming years.
You need to deploy the right infrastructure and capitalise on your current data systems.
You need a digital bank that customers love To create, update, or enhance your digital bank or mobile banking app, you need to deploy the right infrastructure and capitalise on the considerable time and resources you’ve already invested into your data systems.
This leads to a crucial question: build or buy? Should you apply your internal expertise to the challenge or buy white-labelled solutions from outside specialists? It’s a high-stakes choice: around $900 billion of the $1.3 trillion spent each year on enterprise digital transformation goes to waste.
As experts in digital engagement, we can make sure you beat the odds.
We work with more than 170 banks in over 30 countries, our solutions support 100 million digital banking users, and we process over 15 billion transactions a year. We’ve also surveyed bankers worldwide to gauge where they are in this journey and how they’re thinking about the future.
Read on for our recommendations on how to make the best strategic decision on the road ahead to ensure your digital bank or mobile banking app deeply engages customers and delivers on your key business outcomes.
Why buying is (usually) the better option
When creating or enhancing your digital bank or mobile banking app to enable deeper customer engagement through capabilities like hyper-personalised experiences or gamification, your first instinct may be to build the necessary infrastructure internally.
While your team may be enthusiastic and ambitious, building your own technology stack and digital capabilities in-house is usually a false economy. The process of building a solution capable of driving meaningful customer engagement is full of pitfalls, as the long history of high-profile banking failures has shown. Here’s a sobering fact from McKinsey & Co: some 70% of all transformation initiatives fail. As EY has put it, “partner or perish”. Buying a plug and play, white-labelled solution from an external vendor is the best way forward in almost every case. Your team likely lacks the broad experience and specialised expertise of fintech vendors that have solved hundreds of problems in creating their tried and tested solutions.
By working on a plethora of projects, these vendors have distilled the best practices for building and launching a digital bank that delivers against key business outcomes. Comparatively, your team will be more siloed in its thinking, won’t foresee key challenges, will be hampered by rigid internal processes, and will take longer to complete deployment.
And let’s not forget that your team also has to integrate this solution into your complex legacy systems without disrupting day-to-day operations—bankers we surveyed pointed to this as the second biggest barrier to digital banking innovation.
It can seem simple enough to build a targeted in-house solution—and it often looks cheaper than working with an external vendor.
Leverage the deep experience of a vendor
We highly recommend working with a vendor that has deep experience with the specific customer scenario you want to address.
They’ve already experienced the development failures so you don’t have to—greatly reducing your level of risk. Buying from a trusted vendor also lets you bring cutting-edge capabilities to market much more quickly and see a faster return on investment, both of which are crucial to success in today’s highly competitive environment.
Most vendors can help you get started immediately in the cloud or on-premises, while allowing your team to stay focused on what they do best.
Even the financial argument for building an in-house solution falls apart over the medium to long term.
Your total cost of ownership will grow over time, in terms of both technology and skills, as you continue to operate, maintain, and upgrade aging infrastructure.
One-fifth of the bankers we surveyed (20%) cited high costs as the leading barrier to digital banking innovation. You also run the financial risk of wrong sizing your project: burning through your budget by trying to do too much, or finding that your small test solution can’t scale out across your business.
In contrast, external partners often have a whole ecosystem of solutions, helping you not only deliver on your initial challenge but also flexibly add new capabilities in the future.
Beyond speed, risk, and cost benefits, buying from an external vendor also helps ensure your solution will actually move the needle on your business goals.
A successful digital bank or mobile banking app demands more than just functionality, it must also be grounded in a psychological understanding of customers to engage them most effectively.
Even the most impressive technology won’t achieve your business goals if it isn’t based on what customers need and want.
The best vendors have obsessed over the science of customer engagement for many years.
While your own team’s understanding of this area is likely limited, the best external vendors will have obsessed over the science of customer engagement for many years. They have the expertise to know what works.
Ultimately, only the biggest players with their own innovation labs should even consider building a digital bank or mobile banking app internally. For the majority, buying makes much more sense—minimising risk, accelerating time to market, reducing long-term costs, and ensuring the solution delivers on its promises.
What to look for in a vendor?
Once your bank makes the decision to buy not build, the next question is how to identify the best technology vendor to help.
To find an expert, trusted vendor that meets these requirements. We recommend focusing your search around our key considerations:
1. Deployment flexibility
Your vendor of choice should be able to work with you flexibly, in the way that best suits your business.
Look for those with international experience across a broad range of countries, markets, and languages, as well as a plethora of deployment options, including on-premises, SaaS, and cloud.
The vendor should also be able to vary their deployment approach in different locations, as it’s unlikely a one-size-fits-all methodology will work right across your business. In addition, the ability of a vendor to offer a fully containerised environment for specific independent services can also enable better hardware resource management that reduces your total cost of ownership.
2. Legacy agnostic
Your vendor should boast state-of-the-art infrastructure and capabilities—but what about your own systems? They’ve likely evolved organically over many years, and you need a vendor that can work with whatever you’ve built seamlessly to normalise your data and create the right foundation for a range of different solutions.
Avoid any vendor that requires a costly transformation of all your legacy hardware or operating systems; instead, seek out those that can nimbly sit on top of your existing infrastructure.
3. Continuous integration and deployment
Your solutions should see frequent maintenance and updates, but this process shouldn’t interrupt your day-today operations.
Your vendor should be able to support fast and effective service innovation and improvements through AI-led continuous integration and deployment.
Bypassing the need for human input lowers costs, reduces errors, and greatly accelerates the pace of deployment and release management.
4. A platform-based approach
Ideally, your vendor won’t simply provide access to a single solution, but an entire ecosystem of new capabilities through a modern micro-services architecture.
Look for vendor platforms that can integrate with rapid APIs to further extend your capabilities through other external partners or internal co-innovation.
The ability to incorporate or develop new functionality will dramatically accelerate future innovation. With easy access to a wider range of fintech solutions, you can continue to unlock new capabilities and meet changing customer needs right across the omnichannel banking experience.
The ability to incorporate or develop new functionality will dramatically accelerate future innovation.
Alongside all these considerations, take a moment to think about your technology vendor’s mindset too.
Anyone you work with should feel they are in this journey with you. You need more than just a technology vendor, you need a true innovation partner that can respond to new challenges with agility—helping you adapt to customer feedback, scale solutions up or down, or add new capabilities in real-time.
Unlock a treasure chest of customer-facing functionality
While focusing on technology deployment, integration, and extensibility demands, it’s easy to lose sight of what your digital bank is really all about—creating value by driving customer engagement, loyalty, and digital sales revenue.
Building the right foundation of infrastructure and data is one thing, but delivering a digital experience that makes customers love your bank is another.
The quality of your technology is irrelevant if no one uses it; to achieve your key business outcomes, your solutions must always be grounded in behavioural psychology.
It’s absolutely critical to look for vendors who understand this requirement, who have obsessed over the psychology of customer engagement, and who are constantly tuning their solutions to apply the latest learnings from big tech companies and social media giants.
To move the needle on your business outcomes, your vendor should be applying psychological insights from countless projects to enhance customer engagement and service stickiness.
Four-fifths (79%) of bankers we surveyed said a vendor boasting expertise in customer behaviour would make them likely or very likely to partner externally.
Even the most impressive technology isn’t enough to ensure your digital bank or mobile banking app engages customers effectively.
Uniting technology and psychology enables you to unlock a treasure chest of customer-facing functionality and drive a successful digital banking experience tailored for your market.
Harnessing real-time enriched financial data in a
modernised platform ecosystem can drive compelling solutions like:
Hyper Personalised Insights & Advice
Customer data enables you to make predictions about the next stage of someone’s life—such as buying a home, having a child, or retiring.This lets you proactively send tailored advice, insights, or product recommendations at just the right moment, encouraging customers to rely on you as a trusted advisor. Here are just a few examples: mortgage options to help lower monthly payments, notifications on unpaid bills and investment options to improve financial security.
Gamified Savings
Today, almost half of Millennials (44%) are stressed about not saving enough. Help your customers nurture their savings to increase engagement rates, grow your saving portfolio, and cross-sell products. For instance, you can make it easier for customers to start saving, automate donations or investments, and offer rewards to reinforce good financial habits.
Cashflow analysis
Build trust and loyalty by proactively helping your customers manage their finances through a deeper understanding of both their balance history and likely future cash flow. From paying bills on time to highlighting opportunities to save, a cashflow analysis tool provides your customers with an invaluable personal financial coach that can help them with their everyday finances.
Led by the psychological insight that people in general hate to budget, we’ve developed a cashflow tool at Meniga which applies machine-learning algorithms to detect transaction patterns and predict future activity without forcing customers to input lots of numbers. As well as offering balance projections for the future, we keep users engaged in their finances through notifications about how real transactions matched our predictions, as well as ‘what if’ scenarios.
At Meniga, our approach to gamified savings helps customers save and then manage their savings through a variety of methods—from fun automated rules, to competitive challenges and more.
We make it easy to discover, understand, and manage a wide array of savings rules, keeping customers in full control while also intelligently safeguarding their finances. And we help customers do good with their savings too, by rewarding automatic donations to good causes.
Carbon footprint tracking and offsetting
Carbon-conscious consumers are here to stay—two-thirds (63%) of people want their bank to help them offset their carbon footprint, while even more (68%) are interested in green financial products.
You can deeply engage customers by giving them the knowledge and power to fight climate change, growing their loyalty, generating new revenue streams from green products, and extending the impact of your Environment, Social & Governance policy.
Your innovation partner
Choosing to work with an innovation partner like Meniga sharpens your competitive edge in today’s overcrowded market.
As well as slashing the time it takes to launch new solutions and see value from your investments, we’re also constantly looking ahead to the next big thing for your bank—helping you outpace the competition today and tomorrow.
Now’s the time to unleash limitless possibilities for digital innovation and customer engagement.
There’s no data system we haven’t seen
and no challenge we can’t solve.
We can seamlessly work with your existing systems to offer you the best of both worlds in terms of digital banking innovation.
We combine the benefits of lightweight, modular, low-risk, easy-to-deploy, and expertly designed-solutions with the freedom to innovate and expand on our strong infrastructure and data platform internally or with other external vendors. Our event-driven architecture, which cleans and consolidates your data before disseminating it into the Meniga ecosystem in real time, makes it far easier for you to go further and faster on your innovation journey.
With around-the-clock access to all your core data, you can plug into any part of our architecture to build solutions in-house or to partner with other external fintech vendors that add niche capabilities. In short, we make the world your oyster: empowering your bank to draw on expertise from a whole spectrum of different partners and unleashing access to a world of experience and specialised capabilities that customers will love.
Now’s the time to unleash limitless possibilities for digital innovation and customer engagement. Find out how we can help you drive digital banking transformation that delivers on what really matters to you: higher customer engagement, loyalty, retention, and revenue!