Financial institutions (FIs) face challenges on two separate but equally challenging fronts. On the one hand, they have the consumer and their rising demands to satisfy. On the other hand, they face a mix of regulators who oversee their operations.
FIs face a conflicting set of push-and-pull challenges to the innovation efforts they want — and need — to make.
While this tension does hinder the progress of their transformation, CheckAlt Chief Information Officer Ram Bajaj told PYMNTS, in the modern world of payments, there is no such thing as a “do nothing” option since the dual requirements piling up from consumers and regulators simply close off that possibility.
“A lot of the big banks are going to miss out,” Bajaj said, noting that once they can get products into consumers’ hands, they have advantages built in with their large customer bases and reserves of consumer trust.
But getting there, he noted, has been a whole lot harder for large legacy FIs than for FinTechs that can partner up more readily with one another to move the ball down the field faster, which is an important attribute in a rapidly changing environment where adaptability and flexibility are key.
“If they can’t move fast and they’re not doing the regression testing, they’re going to get a lot of defects, and they’re going to miss out on new features and products for the customer,” Bajaj noted, adding that this also creates an opportunity for FinTechs to deliver on consumers’ ever-lengthening list of expectations.
For businesses of all sizes, he noted, that list now includes features like faster payments, mobile wallets, instant payments and voice payments. Products and services are essential, rather than optional. As a result, there is a mounting sense of urgency as the fear of missing out is constantly creating ever-more pressure to get the products quickly pushed out to the market for customers’ use.
This is complicated work, he noted, that is compounded by the fact that it puts pressure on those dealing with the complex job of building changes on the back end, while also ensuring the consumer is unaffected on the front end.
Changing The Airplane’s Engine Midair
The biggest challenge of the great digital migration is that customers’ expectations are high and are moving toward being able to interact with the financial system 24 hours a day, seven days a week, and “rightfully so,” Bajaj noted given the tremendous leaps and bounds the industry has made in terms of real-time payments and mobile deposits.
While those are all worthwhile and critical additions, he said they are also being held back by legacy infrastructure and software that is at the end of its life cycle.
“It becomes challenging to keep the 747 in the air while you are trying to change the engine,” Bajaj said. “So as environments get complicated, there are a lot of parts that need to be swapped in and out quickly without impacting customers, especially when systems are running ’round the clock.”
Bajaj contended that the fix for this essential mismatch of capacity and need is automation — and lots of it — because manual testing isn’t scalable, particularly around regression testing.
New features are only useful if they can interact with what’s already there — meaning testing a new product isn’t just about testing the product itself, but every previous product and feature that the product is going to interact with.
That’s something only possible with regression testing, which makes it easier to push a new product to market with confidence that they won’t become the “really good idea” that went on to crash the system because it wasn’t compatible with the infrastructure that supported it.
Bajaj noted that elements like testing and building infrastructure geared to take advantage of application programming interfaces (APIs) can often seem like detours, but capabilities that make payments smoother, safer and more consistent are actually a main destination.
While transaction speed in the current environment is important, he said it is one of many critical considerations alongside security, reliability, consistency and predictability.
That said, when it comes to constructing a better commerce experience, particularly when competing against traditional players like banks, which are slower, speed can create an opportunity for FinTechs to step in and shine.