The question of whether to build or buy was a focus of Product teams for many years, but it is not the right question to focus on any longer. Industry and technology are moving at an increased pace every year. Remember when things would slow down during the holiday season, and you could take a breath? Those days are gone.
The question for credit unions today is: Should I buy a solution or partner with a provider. There are several considerations when making this decision:
- Ongoing development: When deciding on a buy or partner strategy, one of the important considerations is the approach to ongoing development. What is the commitment of either party to product evolution? That is, will the product be continually developed, or will it potentially stagnate?
- Regulatory requirements: This is the 800-pound elephant in the room that no one likes to talk about. Meeting regulatory requirements is a serious consideration. Regulations and regulatory guidance are constantly changing. Would you rather monitor and receive documentation from a partner that they meet current regulatory requirements and, as part of the agreement, are required to meet new regulatory requirements? Or are you comfortable maintaining current and future regulatory requirements for the purchased product?
- Competitive Threats: We know the industry and technology are moving at an unrelenting pace. How will you address competitive threats? Can the purchased solution be updated to address competitive threats, or will a partnership with a provider be more likely to accomplish that?
- Inside the Industry: Is one of the criteria for making the decision to buy or partner based upon current provider options within the industry? Look at your SWOT analysis from ten and five years ago. Look at your SWOT analysis from last year. How fast have the criteria to maintain your competitive advantage changed? How about last quarter? Last Month. Yesterday. Today. More likely than not, competitive threats outside the industry can only be addressed by solutions outside of the industry.
- The Integration Test: Take a look at the integrations to your digital banking platform. Are those integrated products ones that you purchased or that you acquired through partnerships? Chances are the majority, if not all, of the integrated products are through partnerships. Even though that relationship is between the digital banking provider and the partner, the solutions they offer can be custom tailored for each credit union.
An additional advantage of partnerships is the ability to interchange providers. For example, the trend for many digital banking providers is to aggregate payment methods into one screen. There are no longer separate screens for bill pay, P2P, A2A, etc. Since the digital banking provider controls the presentation layer, the user will always see the same page for Moving Money, but the existing providers offering those services can be swapped out for new providers with minimal disruption to the user (if any). A bought solution may meet integration requirements, but there will be costs to scope the amount of hours to build the integration, the actual cost of building the integration, and most likely monthly platform costs. Each time the product is updated, the process starts all over again. The long-term costs of offering a bought solution in the digital banking platform may be prohibitive compared to the costs of a product integrated through a partnership.
Deciding whether to buy or partner to offer a solution can be an arduous task. Which is more cost effective? If you choose to partner, what happens if the partner goes out of business? If you choose to purchase, what if the coding language phases out over time? How expensive is a developer that knows the language, and can they be found? If it runs on a Windows platform, can it be upgraded to the next release to protect against security concerns?
At the end of the day, the choice is yours. Whatever decision you make, ensure the solution can be modified quickly to address competitive threats and be integrated into other systems. Disparate products do not have a place in today’s interconnected world. Finally, we cannot emphasize regulatory concerns enough. Proper due diligence is critical not only at the signing of the agreement, but on an annual basis. Reputation risk is non-negotiable.