Banks and especially smaller credit unions can struggle with being innovative. While management is all for innovation, their technical team likely sees a different reality. But why?
Consumers are used to dealing with fast, always updated, cutting-edge experiences from Apple, Amazon, and Google. These are apps, devices, websites, and services that customers use every day. The consistent innovations pushed out by these companies become second nature to some customers. When the customer goes from this experience to that of their financial institution, the differences are obvious.
There are a few reasons for these differences.
Legacy Systems
Financial institutions must work within a regulatory environment. It's no secret that fintechs are innovative and on the cutting edge of what's technologically possible. Fintechs aren't as heavily regulated as traditional financial institutions, giving them a great advantage in innovating.
For those reasons, larger financial institutions often buy fintechs rather than trying to recreate the wheel.
Workload Demands
Keeping legacy platforms working can be more than a full-time effort. Just like any other platform, there are third-party vendors who are integrated into the system. When a problem arises, teams have to track down the cause and the vendor who can fix the issue. Depending on how old the system is, the vendor may no longer be in business.
Of course, teams also want to innovate. Trying to make a legacy system do more than it is capable of can lead to issues, which means unscheduled time fixing them.
These problems don't mean banks and credit unions can't innovate. Identifying what is holding them back and building out a roadmap for innovation, one step at a time, can help move finial institutions forward. Rather than replacing an entire platform, it is often possible to use newer components and upgrade in stages.
Innovation means never standing still and always striving to go beyond customer expectations. This can be difficult in banking but not impossible with strategic planning.
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