Hello Bank, You Are Not A Snowflake!

For decades banks have been told they are a snowflake by various partners and have projected that mentality. Consultants have always said each bank is different from all the others. Yet if banks asked their customers, the answer beyond different personalization would be, the institution still only delivers deposit accounts, loans, and specialty services just like all the other banks. Then why are banks considered so different? Because the Tech Stack and method of delivering products and services is different. But that does not make banks a snowflake.

A financial institution’s Tech Stack has been built out by various leaders and groups over the years. The organization has been through a core conversion or two. Success has been achieved but mistakes have been made too. This has caused the technology offering to be disparate, but only through vendor names. At the core they are similar, it requires having the right understanding how technologies connect. In an “Open API” world there are very few limitations, if the organization has the right perspective.

Banks have taken pride in being different by their approach to customers. Delivering products and services in various customizations through diverse locations is an institution’s attempt at competitive uniqueness. Sure, clients walking through a bank’s door get a specialized engagement that some other banks don’t deliver. This does not make banks a snowflake.

Part of the snowflake phenomenon has been consulting and technology companies don’t truly understand banks, not holistically. Three of the largest core banking providers; Fiserv (formed, 1984), FIS (formed, 1968), and Jack Henry (formed, 1976) have been the primary servicers to the banking industry for decades. For many banks, by evaluating their core platform still feel trapped in the 80s. For banks in 2020 to still be fighting to get vital data in a digestible form is a massive failure by these leading providers. After the bank reform of 2010, alternative technology solutions by Fintechs became more prevalent adding healthy competition to an industry long neglected. Great innovation is being developed, but these Fintech’s don’t have a strong understanding of how banks work.

Consulting firms have tried to bridge the knowledge gap but because their primary expertise with banks have been risk management, success to deliver the right solutions have been minimal. Those that are successful usually come with a large price tag that are cost prohibitive for most banks. This has limited many financial institutions access to innovation, but this is changing. With tax breaks and interest rate increases there was the capacity to spend more, banks ventured out to improve their dated infrastructure and customer experience. Interest rates are now reduced to 2008 levels and will be stagnate for a couple years. Tax breaks are likely to be removed – no matter who wins the White House. Banks are left again having to evaluate technological advancement through a financial lens that is shrinking.

An underlining issue in the banking industry that most Fintechs and some consulting firms miss, is the regulatory restraint banks live daily. The expectation is financial institutions adapt immediately but that is a challenging approach. It is still fresh in minds of bank leaders, the demands of government to take TARP funds in 2008 and buy up insolvent financial companies. The result, banks took large losses and were held accountable in some cases for century old offenses committed by the institution absorbed. This along with stringent regulations makes appetite for quick technology adoption difficult for most financial institutions.

The reality now, is many consulting firms are used to treating banks as snowflakes that it has become a common practice. This causes price of technology implementations and upgrades to surge. Fintech’s unfortunately have followed a similar model, mainly because they relied on well-established consulting companies to be the liaison within the banking industry. But this does not have to be, the DNA of a bank is prescriptive. Consulting engagements and technological upgrades should be delivered in a prescriptive form.

Taking a prescriptive approach does not limit a bank from building a competitive advantage or a customized offering to the client. A bank’s Tech Stack should allow it to move quickly adhering to industry regulations. The institution's knowledge of clients and markets differentiates itself from others.

Financial institutions should consider themselves a snowball not a snowflake. When you are snowball your agile, compiled from countless snowflakes. Your shape is well defined and most importantly you can grow fast. Obviously, this is analogy, but so many truths are intertwined. Your bank deserves a better partner that will ensure what is expected gets delivered within a budget that makes sense. Innovate Banks will be that partner. Contact us today!