In less than a decade, the smartphone has become essential to our daily lives. Perhaps ironically, its primary function of allowing us to make a call at almost any time and anywhere has been superseded by a dizzying array of other activities it facilitates, including banking, shopping, card management and more. The convenience and accessibility provided by the smartphone and subsequent digital devices, such as tablets, wearables, etc., have changed things radically for financial service providers.
Today, consumers determine how, when and where they will access such services with the expectation that these services will be available. To say this change has complicated things for organizations is an understatement.
The pace of the digital revolution has put many organizations and their technology providers in a position of continually playing “catch up” with these consumer expectations. New, smaller, early-stage companies have appeared on the scene with solutions that make it possible for financial services providers to improve their responsiveness to the rapidly changing digital landscape. An increasing number of providers are now partnering with these companies, and this presents some challenges when it comes to integrating and testing what these new companies offer with the legacy infrastructure most organizations have in place.
Some of these challenges are obvious. Because these FinTechs have been operating a short time, there is a limited amount of data available to judge their ongoing viability. This creates a valid cause for concern for financial service providers relying on the technology these upstarts offer. To navigate this challenge and others that will undoubtedly emerge, organizations will need to be creative in how they evaluate their options when deciding to establish a FinTech partnership.
Most decision makers at financial services companies understand that doing business with a company with little operating history is a risk. Increasingly, these organizations are taking the plunge nonetheless. However, this does not mean they are doing so with little consideration for the inherent risk. Two factors typically offset the concern over risk:
- The innovative nature of the price or service the FinTech offers.
- The time to market that can be achieved with the FinTech’s more modern technology base.
Innovation is very difficult for financial service providers and most of their large, legacy technology providers to achieve. This is not because the providers or their suppliers are not smart, creative people who understand what consumers want. It is because the providers and their suppliers usually have large complex operations that a number of other businesses, as well as the end users they serve, depend on every day. Trying to innovate within this environment is difficult and slow. It can disrupt a business’s other critical areas of focus.
A FinTech often has the benefit of beginning with few if any customers and a relatively blank piece of paper on which to imagine and create new technical innovations. These characteristics allow them to get new products, services, features and functions to market considerably faster than legacy in-house IT departments or external suppliers. In addition, these organizations are utilizing current generation technological tools and architectures. This usually makes their products easier to integrate with the existing IT infrastructures.
As the wave of new FinTechs continues to build, it is reasonable to expect that more and more of them will be incorporated into the IT environments of financial service providers. Though these FinTechs will add considerable value to the industry, they also will add complexity to the vital systems that power the global economy that businesses and consumers must have to conduct their daily affairs. This complexity will require testing methodologies that deliver more code coverage to ensure that new innovations not only make it to market quickly but also will deliver the level of service expected by those who will use it.