The secret weapon to better banking technology: pilot programmes
Tobi Walter, Shoeboxed – banks need pilot programmes now more than ever
It’s time for banks to wake up. Fintech is advancing at an alarming rate, and the banking world is falling behind. And while we can all agree that fintech is revolutionising the industry, there is still plenty of disagreement as to how financial institutions should respond to the changes.
Traditional establishments are cautious to implement these fintech innovations, citing regulatory issues like compliance standards and security threats as a top concern. But even progressive banks, who have the fervor and agility to launch cutting-edge features, fail to carry out new technology in a timely and efficient manner.
Why? Because too much time is wasted trying to figure everything out across multiple departments instead of through practical testing. Implementing a new offering is also incredibly time and resource intensive, and often these additions are irrelevant or outdated by the time they are realised.
Banks will spend months, sometimes even years, scoping projects and technologies for their consumers, usually making little to no headway with the proposed feature itself. Meanwhile, consumers shift their attention to smaller software companies that offer the customisation and intelligence that meet the demands that traditional banks fail to provide.
A more pragmatic approach to the fintech adoption dilemma would be to skip the in-depth evaluation and instead pursue aggressive pilot testing with innovative software companies (once a preliminary decision is made that the product it is piloting is a top-tier priority at the bank).
Pilot programmes provide financial institutions a platform to test logistics, prove value, and expose shortcomings before spending large amounts of resources on research – let alone commitment – on a large-scale project. Through pilots, new technologies can be integrated into existing applications with just three months lead time and a budget of less than $50,000.
Ultimately, pilot programmes are the single best way to test out new technologies and validate the need for new features without the hassle of spending unnecessary money, time, or talent. They also help determine the value of a particular idea or product to a real user in real time, rather than through months of market research and conditional theories.
The real beauty of pilot programs, however, is that they significantly reduce the amount of internal resources used in the development of the technology at a fraction of the cost. A fintech pilot partner company will undertake the product planning and have the technology up and running within a few months, all within a fixed budget. With little to no internal disruption, your IT or engineering teams are left uninterrupted, and virtually all of the resources needed to run the program come from the company executing the pilot. The absence of internal resources combined with the absence of barriers to entry allow banks to run virtually no risk when they test out new service offerings.
Lastly, with pilot testing, banks can drastically speed up the rate at which they adopt new technologies – something they are notoriously behind on. While pilot programmes are not a new concept, the rapid speed at which third party providers are able to integrate their products into a bank’s feature set certainly is.
The real question for banks is: why are you dragging your feet? You’ve got an army of niche fintech companies knocking at your door to test free and useful features on top of your core product. Why not take advantage?
By Tobias Walter, co-founder and CFO of Shoeboxed, a US-based finance and receipt-tracking company.
