10:10 pm - Monday December 18, 2017

New business model for financial technology

We all know the time tested investment trick and guidance to make extraordinary gains. “You don’t get rewarded for buying assets that are loved and expected by all to do really well. Good old contrarian investing has much merit.”

Traditionally till now, the technology players have been following a set process model for dealing with financial institutions – focusing on the varying combinations of location (on site, near shore and off shore) and responsibility (total ownership, shared ownership and no ownership). It was taken for granted that all technology players will bring in the required domain expertise.

In practice, these technology players provided immediately required (or ‘adequate’) technology support. Since they lacked in integrating complete business requirement (or domain content) in the said technology there were frequent enhancements to the applications, major re-engineering efforts, and sometimes abandonment of such ‘ill-equipped’ applications.

The times are changing now. The Financial Institutions require their technology players to provide competitive technology advantage at lower costs and thereby enable them to provide improved level of customer service. They – the financial institutions – also expect the technology players to bring on to the table the industry and regulatory best practices.

Therefore, the conventional technology support model is being threatened.

To achieve strategic success, to realize greater levels of efficiency, to solve problems across the business and to meet the business competition squarely in the market place, our financial institutions in these ‘challenging’ times will require not merely a technology support provider but a full-fledged technology partner.

Even a school going kid will recognize and propose that the requirements of financial institutions can only be met entirely by a ‘pure’ ‘financial’ ‘technology’ player and not by our ‘conventional’ technology player who specializes in every domain on earth.

If one were to look at the IT spend budgets of our financial institutions and also the number of IT vendors in their approved list, one would be astounded by their enormity. It would be ideal if these financial institutions enter into to strategic contractual agreements / arrangements with a single and capable ‘financial technology’ player with proven track record to provide support in all areas. This way the financial institutions will be able to reap the double advantages of volume benefits and assured quality (by making a single financial technology player responsible for delivery).

Proactively, our financial technology player can prepare and propose this new model – a true partnership model – to the financial institutions and in addition they may also propose that they would assign a separate R&D team to prepare for the future in consultation with the financial institutions and for launching new financial products. In case of need in specific areas, this financial technology player can of course enter into back to back contractual agreement with other service providers.

The success of the financial institutions in future will therefore directly depend on this model and the capability and maturity of the financial technology player and on the natural bonding between them (not necessarily resulting out of the underlying contractual arrangements but out of mutual respect and regard).

In the days to come, therefore, our financial institutions will be well advised to save their precious time and effort through this partnership model.

Any takers?

PS: I understand from my learned colleague that a similar model – dealing through a single vendor (This vendor was not named as a partner as explained in our proposition above) – worked well with Indian banks when they went for core banking services implementation. What we have discussed and proposed above is an enlarged ‘partnership’ model in providing financial technology support through a single source to our financial institutions.

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