- Ensure you have a clear vision for the future
Whether you are exclusively using 3rd party solutions or integrating them with in-house solutions, it is increasingly critical to have a clear vision for your technology architecture. Do you understand which components you want to buy vs build, both now and in the next 3-5 years? Do you understand how the different components will fit together? Increasingly, organisations need to ensure they are building agility into their architecture by ensuring components are loosely coupled.
A piecemeal or siloed approach without a clear overall vision, is likely to incur far greater costs in the long term if systems need to be replaced at a later date. Define a clear vision upfront so you can avoid short term pitfalls and costs. This will ensure you are building your technology environment in a strategic way which will ensure better results over both the short and long term.
- Finding the right vendor solution is critical
Navigating the busy Fintech market can be extremely tricky. Our survey results showed that 74% found it difficult, or very difficult, to find the right solution for their challenge. 89% of respondents said there was no single source of information for sourcing Fintech solutions, with 48% of respondents relying on recommendations, referrals or previous experience.
Vendor selection processes can be very time consuming with the involvement of multiple stakeholders across the organisation. We often see organisations trying to fit ‘square pegs in round holes’ simply because it is ‘easier’ than engaging new vendors who would be better suited. This is often seen as the path of least resistance but ultimately, this approach generally fails to deliver the desired business outcomes.
While there is an overhead associated with managing multiple vendors and integrations, there is a balance to be struck to find the right solution which best meets the needs of your business. The benefits of finding the right solution are clear, they will typically cost less to maintain, better support the business, and will not need to be replaced in the short or medium term.
- Vendor selection is often unstructured
With increasing adoption of 3rd party technologies, it’s vital to follow a structured process and conduct the right level of due diligence when selecting a vendor. This can help ensure you identify the right vendor first time and avoid the trap of having to replace technology providers after only a relatively short period of time.
When setting up a vendor selection process, there are multiple elements to consider. A structured process can help you navigate this evaluation process effectively. Typically, a process should look to include the following steps:
- Understand your requirements and proposed design, as part of your overall vision
- Gain business buy-in and build the business case
- Define the selection process, the decision-making framework and criteria
- Identify a shortlist of vendors through an initial identification process
- Evaluate vendors through detailed due diligence and the decision framework, while refining the internal business requirements, design, and business case
- Finalise internal approval and vendor selection processes
A structured process can ensure that decision-making criteria is objective, the right stakeholders are involved in the process from the start, requirements are clear and both internal and vendor processes are considered properly.
- Benefits need to be articulated clearly
Over the next 12 months, financial institutions anticipate that the greatest benefits from leveraging financial technology will be: improved efficiency, greater transparency in decision-making and reduced costs. Within Regtech, the top 3 benefits identified are operational management, strategic decision making and risk management*.
Identifying the key benefits that new technology can bring is critical to developing your business case. With so many competing priorities internally, it is essential to build a strong case that is clear about the benefits that will be delivered. The more you can create a compelling narrative around the benefits of your initiative by linking them to the overall vision, the strategic goals of the organisation, and how it will help specific stakeholders in the business, the stronger your case will be.
The use of key performance indicators and metrics will significantly enhance your case too. Demonstrate the link between your initiative, the change in performance and the benefit that will be delivered to back-up your compelling narrative.
- Budgets are the biggest challenge
Financial institutions identified that the greatest challenge they expect to face over the next 12 months with regards to financial technology, is budget constraints. The need to select technology that will endure, in a marketplace where there is no ‘one solution’ to fix all problems, is another critical challenge*.
With numerous initiatives competing for scarce budget and resource, it is important that your organisation is focused on the most important areas. An objective process to prioritise initiatives – using the overall vision as the ‘north star’ – can help to ensure that key decision criteria such as benefits, cost and resource can be considered for one initiative against another.
It can be extremely helpful to support your vision with an overall roadmap, so decisions are not taken in isolation and there is a clear path and order to your initiatives. Often strategic initiatives will be weighed up against others which are dealing with more immediate ‘issues’. If possible, use the opportunity to ‘fix’ immediate issues through a more strategic initiative, solving two issues in one go.
- Skillsets need to evolve in key functions
Despite the increasing use of technology in risk and compliance functions, only 15% of respondents stated that they had invested in new specialist skills within the team. 52% had invested ‘to some extent’ while 24% said they had not invested, but knew it was needed*.
The changing role of risk and compliance functions is a key theme. With technology playing an ever-greater role in their day-to-day activities, these functions are taking a much more active role in the sourcing, selection and implementation of new technology programmes. Compared with 5 to 10 years ago ,when risk and compliance were seen to take a ‘back-seat’ in technology change, today they are leading these transformation programmes.
It is critical that risk and compliance functions recognise the changing skillsets and actively augment their teams with people who carry both technical and change skillsets. This combination will help them accelerate the digital transformation of critical processes, while remaining true to their core purpose.