Financial institutions are becoming technology-driven companies

Over the last couple decades, the internet has completely transformed consumer experiences and expectations. People expect instant access to everything from food to books to medicine, and an increasing demographic of young consumers are making major life decisions by looking at options on the internet, not just calling somebody for advice.

This new world has changed the way that consumers think about financial products, which also means it has changed the way financial institutions market to their customers, engage with them, and meet their needs. In particular, we are seeing a shift from local footprint to digital engagements. Customers find their next lender on Google or Credit Karma, not just billboards or commercials during an NFL game.

This has changed the strategic focus of many of our leading financial institutions to engage with this new consumer and in this new market. In particular, technology is now a core strategic function, not just a supporting one. We've seen an increase in the importance of the CIO: they've gotten bigger budgets, more headcount, and more say in how the business runs.

As CIO’s re-evaluate their technology strategies, one question they often ask themselves: where to build, and where to buy? A lot goes into this question, but it’s very rare for a financial institution to actually build the hundreds of systems they need — some things are better bought.

When buying, the new technology-focused regime also demands a new kind of partner. No longer is the business the only buyer, and technology just there to make it work; now the needs of the technology team are the needs of the business, and there is a resulting premium on interoperability, open architectures, and operational excellence.

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Interoperability

One of the biggest problems we hear when talking to lenders is that as the tech stack has ballooned with the technology needs of lenders and borrowers, the number of integrations between vendors has grown exponentially. These integrations are not always robust, and when things go wrong, vendors are often left pointing the finger at each other rather than working well together. Furthermore, many vendors refuse to work together, either due to very real resource scarcity, or because of competitive dynamics in other parts of the stack or vertical. Technology-driven lenders need the flexibility to choose the partners that will work best for their unique needs for each point solution, without being constrained by some solutions not working well together.

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Open architecture

No matter how many other partners a vendor works with, though, the lender is going to have unique needs and want to extend the capabilities of their partners with their own solutions. Whether it’s custom business logic, covering a vendor feature gap, or even building an entire proprietary piece of the stack, every scaled player is going to have unique, differentiated business or technology needs that they want to be able to solve themselves. Unlocking this requires vendors to have an open architecture, where a technologist can build or bring any solution to a platform and plug it in with robust API and webhook capabilities.

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Operational excellence

As lenders become more and more tech driven, their expectations are rising in line with those of their employees and their customers. Financial institutions with technology as one of the centerpieces of their strategy expect that centerpiece to work flawlessly: to be available 24/7, high performance and responsive in milliseconds not minutes. Where downtime every week and 30 second page load times might have been the status quo 20 years ago, employees and consumers today won’t accept that level of support, which means the enterprise buyers aren’t either.

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What’s next

We are already seeing technology leaders focus more and more on building an end-to-end technology stack with partners that are interoperable, open, and technically excellent. This will unlock enhanced functionality, lower operational costs, and differentiated digital experiences.

As technology continues to progress through exciting new frontiers such as AI, and consumer adoption continues to expand as younger generations start to buy their first homes, having a technology stack that is differentiated and future-proof will be more and more important to lenders’ success. We’re excited to see how the technology capabilities of lenders expand, enabled by great technology leadership and interoperable, open platforms.

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