The banking industry has historically been slow to modernize. This makes integrating a modern tech stack difficult for most incumbent banks. Fintechs are defined as organizations centred on new, innovative technology designed specifically to improve or automate the delivery of financial services. As a result, the core value of a fintech is inextricably linked to its platform and cutting-edge technology.

There are two major factors that have the greatest impact on a tech integration strategy.

Timing of core system upgrades

Most banks are currently in the process of modernizing their core platforms. This means that the acquired tech stack’s target is, at best, a moving target. There might not even be a target at all.

It is important that the acquiring bank conducts a thorough evaluation of how well the fintech’s tools and systems fit within the nature, scope, and complexity of the bank’s systems before proceeding with the acquisition. Remediation can be costly and can impede integration planning. The technology organisations tasked with the integration can plan effectively by identifying differences in the tech stacks. Governance, architecture, and delivery practices are also important considerations for the technology operating model. Operating practises such as how quickly decisions are ratified and contracts are executed, as well as product enhancements, are also critical and may impact value realisation due to their influence on timeliness and execution efficiency.

Maturity of the cloud migration

The cloud now provides much more than just on-demand compute, storage, and network did 10 years ago. Additionally, a cloud serves as a platform for new ideas and approaches to doing things. It can speed up innovation if this is realised. The business’s ever-changing needs are supported by the cloud continuum, which is a foundational technology and capability.

Migration can be difficult and time-consuming because it requires navigating complex legacy systems, changing business and operating models, evolving architecture, applications, and data, reskilling your workforce, and complying with regulations. Cyber-risk is also a concern. However, cyber-security management is constantly improving to the point where cloud providers are far better at ensuring hardened security than most businesses can achieve on-premise. However, many businesses are still concerned about data loss or compromise. They are even more cautious when migrating employee and customer data to the cloud.

So, what should your fintech technology integration strategy look like?

Two threads of technology integration should run in parallel. The first is a traditional integration strategy in which IT consolidation considerations are still important and the main dynamic is optimising existing infrastructure to make it repeatable. Banks take the lead in change management to ensure retention and growth. For non-differentiating components like email, collaboration, and storage, the standard playbook works very well. Banks should be able to carry out these functions quickly and efficiently. The goal of functional integration of areas such as finance, HR, and legal should be to ensure that technology is not a barrier. Integration does not occur in a vacuum; the acquisition must always be balanced against in-flight structural programmes.

The second thread is the integration of the actual fintech platform or product. The technology integration strategy cannot obstruct growth-driven development in this case. When the deal thesis is revenue-driven and the acquisition cannot be justified solely on the basis of cost savings, a strategic and in-depth analysis of growth potential and the market is an essential component of due diligence research. Product engineering and roadmaps are critical levers for scaling technology, connecting existing systems and applications, and achieving the required growth. To accomplish this while retaining fintech’s unique talent, the vision and roadmaps should be developed collaboratively.

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