Apparently, there are three key considerations when it comes to traditional financial institutions commissioning an innovative solution from a third party, rather than developing one in-house:
- Large financial institutions have established structures and processes that may not be conducive to rapid innovation. Their IT departments are often focused on maintaining existing systems, making it challenging for them to pivot towards developing new, cutting-edge solutions.
- Innovation may not be at the core of these institutions’ operations. Over the years, they may have shifted their focus away from their original mission and towards optimizing their current business model. This shift can make it difficult for them to allocate the necessary resources and attention to innovation.
- Successful innovation requires a specific mindset, a dedicated team, and strong leadership. These elements may not always be present within a traditional financial institution.
In conclusion, it is often more cost-effective and efficient for banks to partner with a third party for innovative solutions. Banks have numerous responsibilities, such as compliance, regulation, and business development, which can limit their ability to focus on innovation. On the other hand, third-party companies specialize in creating innovative products and have a broader perspective, as they work with various players in the industry. This specialization allows them to deliver the needed solutions more quickly and effectively.
Octavian Patrascu, CEO and founder of CAPEX.com. He is a founder with over 10 years of experience in developing companies with global reach, currently focusing on technology startups.
