Explore whether building or buying a digital banking solution is the right choice for your financial institution.
In financial services, a digital banking solution refers to software that allows financial institutions to provide banking services online. These platforms typically include online banking platforms, mobile apps, self-service portals, and built-in security features to protect customer data.
Customers can use these tools to manage their accounts, transfer funds, pay bills, and check balances — no branch visit is required. With 78% of U.S. adults having a preference for digital banking, these platforms have become essential. Moreover, customer satisfaction appears to be high — 97% of users report positive experiences with digital banking services.
So, if your financial institution is undergoing a digital transformation, should you build your own digital banking solution, or is there already a tool that fits your needs?
The primary appeal of digital banking solutions is their convenience and empowerment. These tools give customers control over their financial activities, giving them access to their finances anytime, anywhere. These platforms enable customers to perform tasks such as
One of the key benefits for banks is enhanced customer experience. Today, 67% of customers prefer self-service over interacting with a representative. Additionally, 91% of customers would use personalized online tools and resources if available.
Digital banking also streamlines many rote operations. Most apps now automate routine transactions like:
Automating such processes both speeds up services and allows bank employees to focus on more personal customer interactions. Additionally, digitizing banking processes helps banks maintain regulatory compliance. With today’s technology, banking applications can integrate top-tier data privacy measures and configure all digital transactions to adhere to regulatory requirements, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.
Now that you know what digital banking solutions do, should you build your own proprietary solutions in-house or shop around for already available software? The answer depends on your institution’s size, goals, and budget — but both options come with their own advantages and drawbacks.
Here are the key advantages of building your own:
Building your own digital banking solution allows you to design features and functions that match your bank’s unique needs. This ensures your platform aligns with your business objectives.
For example, you can prioritize features like specialized loan products or personalized customer dashboards — things that may be harder to integrate with pre-built software. You can also quickly implement new technologies through custom coding.
Developing in-house gives you full control over your organization’s data management practices, security protocols, and compliance measures. As such, sensitive customer information will be handled according to your institution’s standards, without relying on third-party software.
You can implement security features such as encryption, multi-factor authentication (MFA), and real-time fraud monitoring. Additionally, having full control over data flow and storage enables you to respond quickly to regulatory changes without disrupting service.
Using your own software gives you control over scaling — adjusting your system's capacity and performance as your business grows. With your own platform, you can:
A scalable platform evolves with your institution, supporting new products and services as needed. It also ensures a smooth user experience during high-demand periods, reducing operational bottlenecks.
Customer experience is now the biggest battleground — 89% of companies compete on this basis, up from just 36% in 2010. By designing a platform that reflects your brand and meets customer needs, you can offer unique interfaces, features, and interactions that inspire customer loyalty.
This custom experience enables you to implement exclusive services, such as tailored financial advice or personalized offers, that third-party software may not provide. A unique user experience helps build stronger customer relationships and stand out in a crowded market.
While custom solutions seem ideal for getting exactly what you want, developing one can present unexpected challenges. Here are some key drawbacks to consider:
Developing a banking app in-house involves significant upfront investment — typically ranging from $30,000 to $300,000. Even though, 80% of financial institutions report planning to increase their technology spending over the next two years, expenses in this range are likely not what most intend. This includes design, development, testing, and deployment. Cost rises with the complexity of the app’s features, security needs, and system integrations.
You’ll need skilled personnel such as developers, UI/UX designers, and security experts, along with infrastructure like on-site data centers or cloud-based computing, storage, and tech support. For smaller institutions, these expenses can strain budgets, even before considering ongoing maintenance and scaling costs.
If you opt for on-site hosting through your own data centers and mainframes, you’ll lose on-demand scalability as your needs for compute and storage go up or down. Alternatively, if you go through cloud service providers for hosting and deployment, you’ll need to cede a lot of data handling control to third parties — largely negating the benefits of having your own software.
Developing a custom banking app is a lengthy process, usually at least nine months for apps with complex, current technologies like machine learning algorithms to interpret user activity or generative AI interfaces. It requires several challenging steps:
After launch, you’ll need to continuously update the system with patches and security upgrades. These steps often involve coordinating multiple teams and meeting regulatory requirements, which further extends timelines.
Building your own software promises control and customization — but it also brings complexity. In financial services, meeting regulatory requirements and delivering a competitive user experience can force your developers to reinvent the wheel. This often leads to systems that are harder to build and may not match the quality or functionality of existing solutions.
Technology moves fast, and custom-built software can quickly become outdated. As advancements roll out, staying competitive means frequent updates and innovations. With technology disruption increasing by 183% since 2019, many C-suite leaders expect this pace to accelerate further into 2024. Keeping up with these changes can be sufficiently resource-intensive with purchased tools, let alone through custom development.
When deciding whether to build or buy a digital banking solution, consider key factors like budget, timeline, in-house expertise, and long-term goals. Custom solutions offer flexibility but come with higher costs and complexity. Pre-built options, on the other hand, provide faster deployment and less hassle.
As the digital banking landscape rapidly evolves, staying ahead with the right technology is essential to meeting customer expectations and maintaining competitiveness.
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