For the last several years, fintech companies have waged a crusade into the financial services space, which has traditionally been occupied by larger, more mature players. These nimble new entrants often scare the pants off the old guard firms due to their ability to rapidly develop mobile capabilities and effectively leverage the internet and open architecture for their solutions.
Instead of fighting the change, firms should innovate as much as possible and utilize technology as a toolbox for developing high quality solutions. However, effectively doing so requires the foresight to delicately balance the company’s emphasis on technological developments with the operational efficiency of the firm. Here are a few things to keep in mind:
Respect the Strongest Trends
There are two big technology trends I see shaping the industry and innovation – the rapid adoption of cloud-based services and Application Programming Interfaces (APIs) for real-time data exchange.
Amazon Web Services (AWS) and other cloud-based service providers have made the process of configuring servers and hosting applications so simple and efficient that it provides companies with an unlimited amount of flexibility and scalability for their platform infrastructure. The simplification of a formerly time-consuming internal IT process for getting code out to customers has allowed many companies to rethink their approach to launching software products. For instance, because the release and hardware setup processes are no longer significant time barriers, a firm can quickly launch four beta versions of a new web-based product instead of trying to pick the “best” one for a single production launch.
"Firms should innovate as much as possible and utilize technology as a toolbox for developing high quality solutions"
Additionally, the widespread use of APIs and the adoption of open architecture standards has increased the exchange of real-time data between financial services companies. This trend toward information sharing has taken the expectation of instant data access to a whole new level. For today’s customers, being able to access checking, savings and retirement accounts via aggregation platforms like Mint, LearnVest and PowerWallet has become the norm. Financial services providers must extend their architecture to communicate and share data with partners and third parties if they wish to stay relevant in this evolving landscape.
Invest in Technology to Stay Relevant
Keeping pace in today’s environment can be tough, but to remain competitive your firm has to invest in technology. Making this commitment provides your firm a guiding principle in bringing the best solutions to your customers. Additionally, top talent wants to spend their days working on challenging problems that extend their current knowledge, so an investment in technology development will help with recruitment and retention. To win new and retain existing business you must be technically equal or better than your competitors; by establishing a culture of innovation, where team members are openly and actively seeking efficiencies, you can increase your firm’s technical relevance.
Stress the Importance of Operational Efficiency
Beyond making the investment in technology enhancements, your firm must also remain operationally efficient, which can present a few hurdles. Corporate growth often forces your technology systems to become more customized, leading to more special cases to handle when testing future code releases. In some ways, you become a victim of your own success. Additionally, to maintain a high level of operationally efficiency, a company must make expensive decisions at the right points in time, which is inherently challenging. For example, most people don’t want to spend money to redo the roof until there is water coming through it because there are so many other things to do with that money. The same sentiment often exists in IT budgeting. A final common challenge is making sure every associate in the organization is aware of the need for operational efficiency, and to create a process for their feedback to be heard.
Take time to analyze the operational processes currently in place at your firm. I am a believer that the best impetus for technical change comes from internal staff demanding better solutions. People get comfortable doing things the way they always have, and many don’t crave change in their routines. However, it is incumbent to communicate how any inefficiency hurts the entire firm’s competitive stance, which in turn, impacts every employee. By creating a culture in which your associates recognize the need for continual efficiency within the firm, you can quickly capture suggestions for meaningful changes. Lastly, take concrete steps to evaluate the operational processes that resulted in errors and cost incidents. Then, establish a dedicated procedure for analyzing these missteps so they can be avoided in the future.
A Balancing Act
The key to performing the balancing act between product enhancement and operational efficiency is to build a culture that values each equally. In essence, both are components within a healthy company’s income statement, and decision-makers need to understand and embrace these efforts with equal ardor.
See Also: Top Fintech Companies