When undergoing digital transformation, financial services companies are faced with a dilemma: to buy a ready-made software solution or build one from the ground up.
The idea to procure a wealth or investment management platform might be tempting. After all, the companies developing such software have vast industry expertise and adapt their products to evolving customer needs.
So, whether you seek to allocate your resources based on risk tolerance and investment goals or automate trading operations, off-the-shelf software has got you covered.
However, there are valid reasons to consider exploring custom financial software development, too. Custom-built software is tailored to your specific business requirements, such as the size of your organization and client base and the nature of the data and operations you deal with.
Additionally, bespoke FinTech solutions can be modified and scaled as your business grows. And don’t forget about full ownership of the software and reduced reliance on third-party vendors.
So, what is the right option for your company? Let’s take a closer look at these two options to help you decide which is a better option for your business.
Custom vs. Off-the-Shelf FinTech Software: Decision Factors
Before delving into a detailed comparison of ready-to-implement and bespoke financial software solutions, let us investigate the factors you need to consider before choosing either option.
#1: Project specifics
Mobile banking apps, cryptocurrency wallets, peer-to-peer (P2P) lending platforms, claims management applications, accounting software, and stock analysis solutions can all be described as FinTech products.
However, their complexity and functionality can differ sonically. The decision to procure or develop financial software should thus be driven by the specific tasks you’re going to accomplish and the availability of ready-made products addressing these needs.
#2: Cost-benefit analysis
In the past few years, the FinTech software paradigm has been gradually moving towards software as a service (SaaS). Instead of selling their products as white-label solutions or offering turn-key software implementation services to each customer, FinTech software providers move their products to the cloud.
They enhance them with drag-and-drop interfaces and experiment with the pay-as-you-go model. As a result, you can now start using accounting software like Zoho Books for as little as €120 per year.
The price of custom FinTech software may depend on multiple factors, such as the type and functionality of the application. According to various sources, custom FinTech solution costs can range between $60,000 and $1,000,000 (and counting).
To make a sound decision, your company should thus weigh the initial investment and ongoing maintenance costs against the FinTech solution benefits and ROI.
#3: Time to market
Should you opt for a SaaS-based product, it would only take your organization a few weeks to merge the system with your existing infrastructure, onboard your team, and start transforming your operations.
If you go the custom route, you won’t have a minimum viable product (MVP) version of the FinTech solution on your hands in less than 3-6 months.
#4: Required flexibility and scalability
Modern FinTech apps and platforms offer a wealth of features to help financial organizations unlock innovation faster. From built-in support for robotic process automation (RPA) solutions to advanced reporting, the capabilities of SaaS tools are endless.
Problems may arise when you attempt to merge off-the-shelf solutions with your legacy apps that have not yet been migrated to a modern tech stack. Similarly, it might be challenging to add computing resources as your workload grows without exceeding your IT budget.
Custom FinTech software is created to suit your company’s needs best. If you partner with a trustworthy software engineering company and strategically design the software architecture to accommodate future expansion, the system will be able to scale smoothly as your business grows.
#5: Vendor lock-in
Your business analysis and risk assessment teams should also assess the risks associated with becoming too reliant on your FinTech SaaS solution provider. By putting a third-party technology system at the heart of your operations, you’re exposing your company to numerous operational, technological, and financial risks.
For example, performance issues on the vendor’s side might cause software downtime and temporarily bring your business to a halt. The SaaS company may also increase prices, which will affect your bottom line.
And you will rely entirely on your technology partner to implement new features and software updates. Bespoke software solutions help eliminate such scenarios.
However, to achieve optimal software performance and provide five-star customer service, a balanced combination of cloud-based and on-premise computing resources is necessary. This infrastructure must be supported by an in-house IT team or a managed services provider.
#6: Long-term vision
The decision to go custom or make do with an off-the-shelf product may impact your company’s strategic goals and vision. Consider whether a commercially available product fully addresses your current and future data analytics and workflow automation needs.
Calculate your IT budget and set realistic ROI targets. Conduct a thorough audit of your technology infrastructure to assess third-party software integration capabilities. Most likely, your long-term innovation strategy would require a healthy mix of custom-built and off-the-shelf tools.
Now that you know what factors may influence your FinTech implementation strategy, let us summarize situations when it would make more sense to use an off-the-shelf tool or develop one from scratch.
Consider procuring FinTech software if:
- You seek to overhaul your processes quickly, getting instant access to specific software features and capabilities
- You’re innovating on a budget and need to get ROI faster to persuade your leadership team to invest in novel technology
- Your company’s needs are generic and can be met with standard features supported by off-the-shelf software solutions
- You lack in-house IT talent to perform software support and maintenance
- You’re looking to reduce costs associated with meeting the industry-specific compliance regulations
Going fully custom is a viable option in the following scenarios:
- Your financial organization has unique business requirements that cannot be met by commercially available FinTech products. An example of such requirements can be fully automating forecasting or replacing your customer support department with generative AI-powered chatbots.
- Your IT infrastructure consists of multiple applications and services. In such instances, complex integrations and expert data mapping are required, and custom solutions can address these needs perfectly.
- You’re looking to gain a competitive edge over rivaling organizations, who may also be using the SaaS tools you’ve been eyeing.
- Security is your company’s top priority, and you seek full control over your operational data.
- You’re envisioning scenarios when a need might arise to scale your application and augment it with new features while keeping the cloud infrastructure costs down.
Final Note
To cut a long story short, the decision to buy a FinTech solution or explore custom development should be based on a comprehensive analysis of your company’s specific needs, challenges, and strategic objectives.
Each of the options comes with its advantages and limitations, and the final choice should align with the organization’s operational, financial, and strategic landscape.