Traditionally, the banking industry has been built on stability and taken on a more conservative approach when it comes to almost any cultural shift, from changes in geopolitical environments to newly developed consumer preferences and trends. For the most part, taking this tack has been beneficial to the industry as a whole, engendering confidence in a market in which capital seeks out calm waters and relatively low levels of uncertainty.
Unfortunately, this also means that banks have been slow to move on from legacy technology that was relevant a decade ago. At the same time, financial institutions are now beset on all sides by challenges that CTOs of that time were unlikely to have been prepared for and could not have foreseen. If there was ever a time that banks should consider an update to their digital payments solution, it’s now, and here’s why.
Current Events and Uncertainty
There can be little doubt that the global coronavirus pandemic has touched almost every aspect of human life in general and industry and commerce in particular. Gathering in public spaces and being in close proximity with others have become nearly impossible, for fear of becoming infected by the virus and either passing it on to others or becoming deathly ill oneself.
Businesses formerly built on face-to-face transactions have either had to shift their traditional models to new ones that accounted for present-day restrictions, or else confront the possibility of ceasing operations until current conditions allow a return to how things were done in the past.
Naturally, the latter option is an unattractive one. Businesses that choose this route would inevitably dip into whatever savings they might have to sustain their operations, even with marginally questionable practices like staff furloughs and contraction.
Corporate banks have been subjected to these pressures just like any other business, and have had to contend with these same issues amidst a violently and rapidly shifting public health crisis.
With this in mind, the adoption of a cloud-based payment solution that attempts to engage fintech companies and acknowledges their role in the payment chain is the only option moving forward. Pursuing this course of action shifts their role from being a competitor to one of a collaborator. It also turns them into a necessary component for the frictionless flow of capital that society and commerce depend on.
Falling Development Costs
One of the major obstacles to many bank CTOs considering a change in their transaction technology is the cost associated with the endeavor, not only from a capital expenditure perspective but also from a cultural perspective. In the past, the financing necessary for a custom systems solution was immense, to say nothing of costs associated with the training of personnel to serve as administrators of said system.
Culturally, banks have been hesitant to implement wide-ranging technological updates. This is because the prospect of having to be retrained into a new technology would often be met with a not-inconsiderable level of pushback from all levels of the organization. From most bank CTOs’ perspectives, the effort necessary to win staff buy-in did not seem like a worthwhile time investment.
Also read: What Is Decentralized Finance (DeFi) Solutions – A Detailed Guide
Today, software development costs are a fraction of what they once were, with many companies reducing their costs because of multiple factors. These include the abundance of competition in the software industry and the reduction in staffing costs brought about by business process outsourcing.
Instead of relying on custom-built solutions that are expensive to design and develop (and even more expensive to maintain), many software companies have turned to prebuilt, out-of-the-box designs that are intuitive and easy to learn.
Given the reduction to both cost and product implementation, banks no longer have an excuse for foregoing a technological update to their systems that has been a long time coming.
Corporate banks that insist on maintaining the status quo will likely be outgunned by other, more agile institutions that fully embrace digital transformation. The above reasons are just a few of the factors that bank CTOs need to consider when being agents of change for their institutions.
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