Build vs. Outsource vs. Buy.
How to determine the best solution for your Financial Institution.
The open data landscape presents financial institutions with a critical choice: build, outsource or buy? This decision carries significant implications for speed to market, cost, and overall business strategy.
Weighing Your Options
Building your own open data solution offers the allure of complete customization and intellectual property ownership. However, this path can be fraught with challenges. Development and testing are time-consuming and costly, requiring substantial investment in technology and personnel. Moreover, navigating the complex regulatory landscape can be a daunting task.
Purchasing a pre-built open data solution, on the other hand, can accelerate time-to-market and reduce upfront costs, as well as efficiencies realized in managing and servicing the platform. These solutions often come with built-in expertise and compliance, mitigating risks associated with in-house development. Not all pre-built solutions are equal - while Caspian offers a plug-and-play point-to-point solution, other open data providers are aggregators.
A Costly & Risky Endeavor
The decision to build in-house can be risky. Direct-to-market self-builds require significant upfront investment, operational restructuring, as well as ongoing operational costs.
The complexity and ongoing support costs of full self-builds are substantial. On average, the top 9 UK banks spent approximately C$20 million on initial development alone. A credit union or community bank would expect to invest at least C$5-6 million for an independent build and several million more annually in operating costs over a 5-year period.
Before undertaking such a project, one should consider:
Major enterprise architecture vendor decisions for both Authorisation Servers & API gateways
Management of multiple bi-lateral agreements & security models to enable external API access
Development of key components and program features such as consent journeys, mapping core systems to financial grade APIs (FAPIs) including FDX, data receiver capability, etc.
Implementation of robust security controls (Security architecture & supporting processes is fundamental & must span multiple regulatory and legislative regimes)
Design and deployment of very complex infrastructure (Infrastructure requires full automation to deliver highly complex ingress, security, compute, data & egress architectures)
Defining new operating models to support open data ecosystems
Establishing and governing critical vendor relationships
Building in-house expertise to oversee strategy and management in a new and rapidly evolving space
Performing analysis and conformance testing
Niche skill sets that quite often are required from global suppliers who have experience implementing Open Data solutions
From start to finish, time to market for a self-build can be 12-18 months or more. Partnering with a vendor with a mature solution can accelerate implementation, reduce risk and reallocate investments toward competitive differentiation.
There are also tremendous costs to be considered over the life of the program. This can result in multi-million dollar costs over just 5 years. One mid-sized UK retail bank required 7 new headcount to manage the new operating model. New teams will need to oversee:
Support for diverse ecosystem participants, such as fintechs with expertise, to cover technical connectivity and issues in the end-to-end architecture
Vendor management
Program and partnership governance
Continuous improvement to address needs from scaling over the long term and to address ongoing evolution in technology, standards, regulation, processes, and customer expectations.
If the above is enough to persuade you to go with a more flexible solution, the next step is to choose between the type of open data connection - point-to-point or aggregator. A point-to-point solution leverages economies of scale to reduce per-API call fees with future growth - an important consideration for understanding predictable, upfront costs. Moreover, the multiple deployment and shared services model empowers financial institutions of all sizes to effectively participate in the open data markets.
Aggregator - the Commoditized Solution
While aggregators or “outsourcing” can provide a route to market, their commoditized offerings may carry inherent risks due to indirect route of data flow and scaling of transaction fees, hosting, and support costs. For organizations wishing to simply comply, this option might not be best. For a more indepth deep-dive into the comparison, visit our blog post “Understanding Open Data: Point-to-point vs Aggregators.”
The Caspian One Open Data Advantage
Caspian One Open Data offers a compelling alternative to a ground-up build. Our plug-and-play solutions provide a pre-built open data ecosystem that can be deployed either in the cloud or on-premise.
Our Evolve solution offers a streamlined approach for credit unions, regional banks and community banks to work together within a data sharing ecosystem. With a focus on core functionalities, shared costs and services, and competitive pricing, participants benefit from efficiencies in implementing the commoditized features while still having the tools to innovate with differentiated offerings. Evolve empowers smaller financial institutions to compete effectively in the digital market.
Larger financial institutions can benefit from our neXus platform, a comprehensive, enterprise-grade solution that supports complex financial products and services. Featuring robust API management, integration with core banking systems, and advanced analytics, neXus offers on-premise options to meet specific security and compliance requirements.
Moreover, neXus enables a vibrant ecosystem that facilitates direct account access for major corporate clients, enhancing their digital experience. By enabling cross-legal entity capabilities across multiple ecosystems, neXus supports broader cross-selling opportunities between retail and wealth management divisions, fostering deeper client engagement and driving revenue growth.
A lot to Process
While building an open data solution can offer control and potential long-term benefits, the risks and costs associated with this approach are substantial. For many financial institutions, purchasing a pre-built solution like Caspian One Open Data provides a more efficient and cost-effective path to market.
By leveraging our expertise and pre-built infrastructure, you can accelerate your open data journey, reduce operational costs, and focus on delivering innovative financial products and services to your customers.
We’d love to hear from you. Contact us to set up a time to discuss your open data and open banking plans.
