Image description

"Banking in a box" vs. "Boxes in a box"?


There are a number of banking technology propositions in the market which all appear to offer the current fashionable “Banking in a box" solution. 

However, these solutions are all very different and can have a significant impact on not only the operational efficiency and capability of a bank, but can attract substantial financial and reputational risk as well. 

The concept of "Banking in a box" has been in existence in the US and European Banks for some time and now UK challengers are looking to engage this solution, many of which claim they will be the first in the UK. 

The truest version of the “Banking in a box” platform is a fully integrated system, which provides complete functionality via one software solution, one direct contract, with one supplier. The other end of the spectrum is where there are numerous systems bolted together by means of engaging multiple suppliers and contracts, thus a "Boxes in a box" platform. In some cases this offering is organised through a third party technology partner, which can provide additional complications.


Complications can range from incompatible software, omitted functionality, to legal recourse problems, spiralling costs, and embedded ratchet agreements. Entering into the wrong agreement can result in further problematic complications such as perpetuity costs, ROCE compression and potentially stifling growth. 

You often hear that you get what you pay for, however, it appears that in this case it is an exception to the rule. The fully integrated, one supplier platforms in many cases are the most cost effective. They are also fully tried and tested, unlike many of the bolt together platforms. 

Many Challenger Banks look to technology to define their unique selling point (USP). Can one system supplier deliver a Challenger Bank’s USP? Possibly, but it depends on the supplier’s offering. A proven track record should be assessed as part of the tender validation process. Potential Investors in Challenger Banks should consider the technology plan as part of their due diligence.

 

 

 

 

  • Will Banks – CFO

  • Challenger Capital

  • August 2015