While the above may appear logical on the surface, it doesn't translate well in practice. Some of the question businesses should ask themselves before settling on a solution: What is the true cost of innovation? How many customers could you potentially lose while seeking more modern solutions? Can your existing infrastructure handle the agility required to onboard new customers or introduce innovative products, particularly when it comes to optimising user experiences?
Quantifying the impact of these factors is not always straightforward, but certain trends can provide insights. Let's delve into one such area: banking cores.
The two opposites
In the realm of financial institution (FI) solutions, there are various approaches to consider. One such option is the pure SaaS model, exemplified by platforms like Mambu's. This model empowers FIs to construct tailored products and services aligned with their business strategies, enabling them to meet the evolving customer needs both now and in the future.
On the other hand, there are alternative solutions available that offer customisation but come bundled with an extensive list of upfront and ongoing fees, including unforeseen and sometimes concealed costs. These solutions often suffer from slow configuration times, as well as delays in launching minimum viable products (MVPs). Opting for these earlier-generation cores can result in missed opportunities and hinder the ability to swiftly adapt to changing market conditions.
Additionally, these solutions tend to be code-heavy and challenging to adjust promptly when market dynamics shift. Given the competitive landscape, speed to market is of utmost importance. The faster one can enter the market, the greater the potential for growing deposits, expanding loan portfolio, and ultimately increasing revenue.
Uncovering cost savings
When it comes to cost considerations, a cloud-native model may appear to have higher fees when compared to the individual costs associated with customisation. However, the real story emerges when you add up all those fees.
Traditional banking cores come with a hefty price tag, encompassing expenses for internal IT resources, maintenance, new requests, infrastructure, customisation, and upfront/recurring licence fees. These costs quickly pile up, including additional expenses for IT security and risk management. And let's not forget about the significant investments in man-hours and coding required to keep up with rapidly changing market conditions.
Conversely, in a SaaS model, all these separate costs are consolidated. By opting for a cloud-native platform, such as Mambu, FIs gain cost efficiencies while enjoying the benefits of a robust, fully configurable solution. A SaaS approach eliminates the complexities and hidden expenses associated with traditional cores, allowing businesses to focus on innovation and meeting the needs of their customers.
When it comes to building a system that truly delivers differentiated capabilities, the custom-build approach often falls short. Instead of focusing on business decisions and other key differentiating factors, valuable time is wasted on constructing the core from scratch.
In contrast, a SaaS approach offers a ready-made foundation with many of the essential components already in place. By leveraging a cloud-native core, FIs can avoid the complexities and costs associated with building a complex and expensive customised system.
Older-generation cores present additional challenges. Further innovation requires not only increased expenditures but also specialised skill sets, emphasising a code-first mentality that limits flexibility and drives up costs, ultimately eroding competitiveness.
A SaaS platform, on the other hand, handles the basics, maintenance, and upgrades through a love-code/no-code approach. This way businesses can focus on building differentiated features and functionalities without the need for significant resources spent on fundamental elements.
Gone are the days of heavy capital expenditures and reliance on an expensive team of advisors. With the SaaS advantage, FIs can start their venture profitably and maintain it in the long run.