Beyond point solutions: Building a cohesive fintech ecosystem through vendor optimization

In the financial services industry, competition has never been steeper. As fintechs and neobanks accelerate the pace of innovation and digital banking demand soars, financial institutions (FIs) can't afford to postpone digital transformation initiatives. However, despite the widespread recognition of its importance, many FIs find themselves stuck in the initial phases of their digital transformation journeys. Research shows that a staggering 70 percent of FIs are unable to move beyond the planning stages of migration.

One of the primary reasons for this sluggish progress is the burden of tech debt and fragmented processes. Over the years, FIs have accumulated a complex web of systems and applications that hinder seamless operations and impede transformation efforts. The proliferation of disparate systems and applications across departments has left most organizations with a hybrid operating environment full of systems that don’t integrate well -- if at all. On average, a typical FI manages more than 200 applications, resulting in a fragmented infrastructure that consumes a significant portion of the IT budget -- 90 percent dedicated to maintenance alone.

As a result, FIs grapple with inefficiencies, data silos, and operational bottlenecks, all of which stand in the way of their digital transformation goals. To address these challenges, FIs must simplify and streamline their complex tech stacks. By consolidating their applications into a unified platform, FIs can pave the way for successful digital transformations.

Here are four strategic benefits of vendor consolidation:

1. Enhancing the Customer Experience

Considering half of all U.S. banks may not exist in 20 years, delivering a seamless and personalized customer experience (CX) is essential for long-term success. By consolidating systems through a single integration platform, FIs can ensure real-time data sharing across all touchpoints, resulting in consistent and efficient service delivery. Whether a customer is opening a new account, applying for a loan, or seeking support, a unified platform enables faster response times and minimizes delays, ultimately enhancing customer satisfaction.

2. Eliminating Data Silos

Data silos are a common challenge in FIs, where different departments operate with isolated data sets, leading to inconsistencies, inefficiencies, and increased risk of errors. This isn’t only inconvenient, it’s also expensive -- poor data quality costs U.S. businesses $3.1 trillion per year. By adopting a unified integration platform, FIs can break down these silos, ensuring that data is synchronized and accessible across the organization, fostering a more secure, compliant environment overall.

3. Cost Savings and Compliance

Beyond the savings driven by better data quality and fewer manual errors, consolidation allows FIs to rationalize their technology stack, leading to significant cost savings and better resource allocation. Don’t forget: a whopping 90 percent of FIs’ current IT budgets are dedicated to maintenance alone. Reducing maintenance overheads frees those resources for innovation and strategic initiatives and eliminates the need to manage multiple systems, which is costly and time-consuming. Additionally, operational efficiencies gained through consolidated integration can lead to secondary cost savings across the organization. This is particularly vital for FIs that are still using outdated infrastructure and legacy systems. A streamlined vendor landscape also increases agility by making it easier for FIs to integrate new technologies and adapt to changing market conditions. Integrated systems facilitate better decision-making, improved compliance, and a cohesive operational framework.

4. Reducing Manual Tasks

Manual data entry and reconciliation across multiple systems are labor-intensive and prone to errors. A so-called “fat finger error” can come with a seven-figure price tag, placing undue stress on staff and leaving FIs vulnerable to unpredictable costs. A single platform streamlines workflows by keeping all critical data and tasks in one place. Automation of those routine tasks then allows staff to focus on higher-value activities, such as customer engagement and strategic planning, thereby boosting overall productivity and insulating FIs against the risks of human error and manual work.

How to Optimize Your Vendor Landscape

So, what does simplifying your tech stack look like in practice? Like any project designed to improve operational efficiency, it requires careful planning and strategic execution, but that doesn’t mean it has to be overly laborious or time-consuming.

Try this stepwise approach:

1. Conduct a thorough assessment of your current vendors.

Evaluate your existing solutions and identify redundancies, critical systems that cannot effectively communicate, and other integration challenges creating unnecessary complexity.

2. Enable seamless integration across all solutions.

To achieve this, you can leverage an integration platform with pre-built connectors to facilitate smooth communication and data exchange.

3. Establish clear criteria for future vendor selection.

Prioritizing solutions that integrate seamlessly with your existing technology stack will streamline operations and avoid future integration headaches.

Unlocking the Potential: A Path Forward

As the financial services industry evolves, FIs that embrace consolidated, simplified environments will be better positioned to achieve their digital transformation goals. This process isn’t about eliminating vendor partnerships -- it’s about creating a strategic and streamlined ecosystem that empowers FIs to accelerate their digital transformation journey. By reducing complexity, fostering agility, and delivering superior member and customer experiences, FIs can position themselves for long-term success in the ever-evolving financial landscape.

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Ryan Dimick is the Chief Product Officer at SMA Technologies in Houston, Texas. Throughout his nine-year tenure at SMA, Technologies Ryan has also held positions as Director of Engineering, Director of Cloud Services, Software Architect, Sr Business Consultant, and Chief Technology Officer. He started his career at Corning Credit Union as a user of the OpCon automation platform and held positions in IT Operations and Programming.  Outside of work, Ryan loves to be creative in the kitchen by mixing cuisines and creating culinary concoctions with his family. He loves running with his dog, the serenity of growing a garden and producing his food, and his competitive spirit prevents him from saying no to ping pong challengers.