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The need for speed: reconsidering the single-tenant mindset in banking

By David Cox, Executive Director, Digital Advisory Services on September 5, 2017

Filed under Financial Services - Banking & Capital Markets

telephone booth with night lights

Financial institutions, at their very core, understand the need for speed.

From prompt credit decisions to lightning-fast trading platforms, banks are keenly aware that their ability to deliver value—and at speed—is the key to winning business and booking profit. But under the weight of sprawling legacy systems and mounting costs, financial institutions themselves have become lumbering giants—unable to compete with the agility of modern startups, or simply adapt to the changing landscape.

Estimates vary on the time required for banks to institute a front-office change—from several months to release a new customer-facing web-portal to several years for new lines of products and services. How are financial institutions planning on competing when the monetization window is now measured in days, if not minutes?

It is high time that banks reconsider their single-tenant mindset and desire to own everything end to end—it is simply a battle they are not going to win. Whether through regulatory pressure (such as PSD2), or more tectonic market forces, there is a gale-force wind sweeping through the digital economy. Financial institutions face a choice: side with the billions in sunk-costs and retrench, or open their systems and embrace agility.

Customer data, relationship, and trust are a bank’s most valuable assets and provide an enduring competitive advantage in financial services. But trust in banks has fallen, data is becoming democratized, and a new generation of customers—millennials—places little value on loyalty. The single tenant model is a thing of the past as new financial ecosystems displace traditional industry barriers. In a multi-tenant world of open banking, banks have the opportunity to be part of many different value chains, and the customer receives services in a seamless, innovative, and secure manner.

  • The API economy. By embracing the shift towards open APIs, the financial institution of the future could become the preferred provider for a myriad of companies in other industries. A truly open bank could enjoy increased market share and an opportunity to capture revenue that would otherwise go to a competitor.
  • As-a-service opportunities. Traditional financial institutions have many decades of experience in security, regulation, risk, and compliance—a decided advantage over new market entrants.
  • An agile, secure platform. With a banking platform that can be adapted to mobile, branch, or whatever the future may require, an agile bank could empower other firms and capture value anywhere, at any time.
  • The trust broker. As the trusted connector for the larger ecosystem in a connected and trusted network, banks could assemble bespoke solutions in real time by leveraging partner resources and offerings.

In this new digital economy, there is a certainty: it is not the strongest that survive, but those most adaptable to change.

Empowering our customers in financial services to innovate is central to our mission: we understand that transformation can be challenging, but we also believe that it holds incredible promise. Our approach is to leverage technology in novel ways—enabling business agility with the tools that will define the future of banking.

As your trusted technology partner, we offer both industry know-how and enterprise-grade solutions. We can help no matter where you are on your digital transformation roadmap.

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