Much of the industry and media coverage of banks’ use of, and collaboration with, Fintechs is largely positive, and rightly so. New Fintechs are changing the landscape of our industry for the better. They tend to target specific functions or processes and introduce new, improved approaches to the challenges we face in specific areas, such as certain key aspects of payments processing. However, there are limitations in their approach and capabilities that do not receive the same level of exposure as the positives. The question is – how much will those limitations materially impact the bank’s bottom line?
One such limitation that we, more often than not, end up highlighting for our customers is the limited return on investment that results from choosing a Fintech provider that is only focused on one aspect of processing, for example, the provision of payment processing rails. This service provision can be on-premise, in the cloud, or through SaaS these days. Much of a bank’s investment in linking to that particular service and ensuring that all aspects of processing and security are fit-for-purpose is then limited to that specific Fintechs range of services.
Therefore, it can become a bit of a cul-de-sac. This is where large investments are made that cannot be leveraged into supporting other processing areas at the bank, and thus the return on investment is reduced, and the total cost of ownership climbs ever higher.
The difference is where established vendors can leverage a portfolio of solutions and services to create a much greater return on investment in cloud and SaaS-based service provisions. By choosing to strategically partner with a functionally more holistic SaaS solution provider, banks are sagely investing in the flexibility of options that a tier-one software house can offer both now and into the future.
As payments processing scales to ever-higher volumes, accompanied by the ever increasing diversity of customer demands, many aspects of processing are put under pressure within a bank’s functional ecosystem. This typically includes areas such as payments on-boarding, real-time liquidity management, account servicing, fraud monitoring and customer profiling. They all come under pressure and scrutiny as the infrastructure evolves.
Temenos has the ability to address each and every one of these limitations whenever they occur, using the same SaaS-based service, running on the same technology platform, supported by the same operational infrastructures and service provision. There is no Fintech provider that is capable of matching this level of functional service coverage, given the limitations of the breadth of their offering and the restricted real-world experience they have of repeated delivery. Thus, there is no Fintech capable of providing an equal return on investment for the holistic delivery of a SaaS-based payments processing ecosystem.
Banks should think about the long-term, strategic investment plan for their operations as they move to a SaaS-based provisioning model, and they should certainly think twice before embarking on a strategic endeavour that limits their options for launching new services or addressing gaps in their processing portfolio. Otherwise, without the option to expand and reach beyond the initial aspects of their processing challenge, they will end up with a significantly lower return on their investment and eventually a much higher total cost of ownership as they are forced to adopt piecemeal add-on solutions from a variety of vendors as their business environment, and customer expectations, evolve.
In the competitive world of payments processing and the need to lower transaction costs, it is important to take such aspects into account when making strategic decisions.