In the bid to hasten their digital transformation, when it comes to innovation, financial institutions (FIs) may benefit from an “app store” approach as they weigh existing and new solutions.
In an interview with PYMNTS, Avi Cohen, co-founder and CEO of FinTech company The Floor, said boosting digital offerings and bringing new ones to market demands quick decision making as banks seek to improve user experience and user engagement.
The company offers a Software-as-a-Service platform that helps banks leverage financial and other utilization data to reduce the number of vendors on which they rely, and in the process streamline their pursuit of flexible and compliant offerings. Cohen likened The Floor’s approach to building an “app store” of digital technologies that can be deployed as banks can improve their internal tech stacks with a range of new integrations.
The need to streamline new product development is especially urgent as banks have had to pivot to online channels amid the pandemic. PYMNTS’ own research has found that consumers are more willing than ever to switch banks in pursuit of better apps and user experiences. In a nutshell: If banks don’t innovate in a way that is imaginative and proactive, they will lose customers.
Looking back over the past decade, coming into the pandemic, Cohen said, banks had looked externally in pursuit of new initiatives, looking out at various markets and opening up a range of acceleration programs and increased engagement with FinTechs. But what’s happened along the way is that these larger FIs have built up relationships with hundreds, even thousands, of vendors.
Now, he said, “innovation needs to also be incorporated internally. It needs to be part of the culture, of the DNA of the bank” even as that FI goes out to seek relationships with financial services innovations. The lag time between finding partnerships and coming to market with a new offering can take as long as two years.
“Can you imagine Google, Apple or … Amazon taking a year and a half, or even more to implement a new technology?” Cohen asked. “It’s unthinkable.”
Banks must grapple with the ongoing challenges of day-to-day operations, technology — and especially regulations — amid any new effort. And, in fact, contended Cohen, absent the demands of regulators, bringing new products and services to market might otherwise be a lot speedier for FIs. Banks’ tech initiatives may be more heavily shaped by regulators at times than they are by actual customer demand.
“You need to find a balance, and I think the balance is understanding what are the capabilities of the bank to move things on their own,” said Cohen, who added “and at the same time, [they need to understand] what is not economically sensible or even technological doable, and you can bring that in from the outside.”
As a new year dawns, he said, there has been a maturity in FinTech solutions that can fit well with banks’ desire to reach customers in new and meaningful ways, especially when it comes to B2B payments.
The app store approach, he said, can help solve some of what’s missing along banks’ digital pivots — namely, transparency and standardization.
“We’re used to seeing transparency,” he said, able to weigh one offering against another, and gain a sense of which apps are more popular (or widely used) than others. “Transparency can play a really crucial part in streamlining the use of technologies across banks.”
Standardization also is attractive for FIs, as they need to know the tech they’re embracing, complied with, for example, anti-money laundering (AML) requirements, payments speed or biometric authentication. The app store effect, he told PYMNTS, offers the participating FI the ability to tap into a shared network that is populated with other like-minded banks facing the same competitive or operational challenges.
Launching Into New Markets
He offered up the use case where a globally-oriented bank may be considering a new market — and specifically wants to launch a new lending business.
“If you would build the entire lending stack from zero, you would probably need to rely on external solutions on an external vendor to provide you an end-to-end solution or even a modular approach where you pick the underwriting engine from one supplier and the [know your customer (KYC)] and onboarding solution from another supplier, and maybe the digital experience by another vendor,” he said.
But through an app store mindset, the bank could evaluate one solution versus another, with a view of data (regulatory or other information) that could be crucial to performing due diligence and forming what he termed a 360-degree view of a would-be vendor or their offering. In this way they could close the last mile of bank innovation, onboarding vendors while seamlessly connecting to an application programming interface (API).
“This lets them accelerate the time to market much faster,” he told PYMNTS. “That’s the end game for many of the banks: the time to market. It’s not just about finding the right solution and evaluating the right solution — it’s about connecting to that solution as quickly as possible.”