System integrators are the often overlooked ingredient in the success of FinTech unicorns

Nebo Djurdjevic Categories: Business Insights Date 22-Dec-2023 5 minutes to read

FinTechs are battling every day to become the next unicorn in the market. At the same time, traditional FIs are establishing numerous FinTech alliances in order to capitalize on the next unicorn success story.

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    While finding a unicorn idea that will deliver growth remains essential, market players are not spending nearly enough effort on keeping their unicorn alive, and on pouncing fast enough toward success once the unicorn has been identified.

    One major point of failure for traditional FIs and FinTechs in bringing the next unicorn to market is their failure to integrate it into its new technical ecosystem, which, more often than not, belongs to the traditional FI. This failure to integrate does not necessarily need to be catastrophic in nature, either. As market competition becomes fiercer and fiercer, a mere slowdown in tactical execution of a FinTech platform strategy can make a difference between a market leader and a slow follower. System integration is a common pitfall in bringing a new FinTech platform to the market. Understanding what good system integration means and choosing the right integrator is key to bringing a unicorn idea to market success.

    Real-world system integration pitfalls – how hard can it be? 

    To understand just how big of a problem system integration can be for a FinTech platform, let’s step out of the world of unicorns and dig into some real-world headlines. 

    Earlier this summer of 2023, the shares of Canadian FinTech darling Nuvei plummeted by 39% – which was 86% down from their pandemic peak. This fall from grace echoed that of another Canadian FinTech, Lightspeed POS. The reason was “slower growth due to longer-than-anticipated lag times in connecting new clients to its technology platform once they’ve signed contracts.” 

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    What makes this fall even more dramatic is that it happened in the midst of news of some explosive market successes for Nuvei. In addition to new client wins, Nuvei spent a significant amount of effort and an even more significant amount of money on a Formula 1 partnership with Mercedes-AMG and on a media partnership with acting superstar Ryan Reynolds. In the end, while the share price stabilized, there was no near-term positive boost to their share price on the horizon.

    To support this market case study with data, we need only look at a staggering statistic from EY, that “40% of bank-fintech partnerships fail to operationalize, often due to poor alignment around strategy and execution.” Indeed, traditional FI-FinTech alliances cannot be avoided, but they are more difficult to execute than one would imagine. Each of the two brings a particular set of strengths to the equation, and yet, each partner is at the precipice of failure if they fail to speak a common language. 

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    When two parties fail to speak the same language, they need a translator. In the world of technology alliances, this role is most often played by the system integrator.

    A good system integrator makes sure the story has a happy ending 

    In order to choose the right system integrator, we must first understand what they do and the benefits they help us realize. And the most supreme of those benefits is the ability to give a unicorn story the happy ending it deserves.

    An experienced system integrator brings the knowledge of proven best practices to neutralize the common pitfalls associated with integrating new technology into an existing, established ecosystem. In other words, a good system integrator prevents the FIs and FinTechs partnering on a solution from having to learn from their own failures, which in turn offers the following benefits:

    • for FinTech – Faster time to revenue and better use of product/platform features by their client FIs, leading to higher revenues and better customer satisfaction; 
    • for FI – faster time to market, which is important because of competitive pressure, and better leverage of FinTech platform features. This leads to better operational efficiency, an enhanced value proposition for their product offering, and ultimately higher customer satisfaction.

    Going back to the translation analogy, the right system integrator speaks the language of technology so familiar to FinTechs, while also bringing domain expertise to meet the traditional FIs’ strategic business objectives. In other words, system integration is not a matter of technology alone.

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    An experienced integrator will be able to make clear recommendations on the features that are possible to implement and those that will actually make a difference to the FI’s customers (and market strategy). A bank may wish to implement a certain set of features, while the FinTech may recommend prioritizing a different set of features. An implementer who understands the industry domain as well as technical possibilities can help this bank actually select a set of features that will be most useful to their customers, while also ensuring there is a seamless path to market in terms of the necessary technical integration. 

    And yet 53% of the banks – again according to EY – have difficulty onboarding new partners. Legacy architectures, paper-intensive approval processes, and poor oversight and support can lengthen the average onboarding timeline to between seven and 18 months.  

    What does all of this mean in the real world? At a time when payment technology modernization can reduce operating costs by 20 to 30 percent and halve time to market for new products, the right integrator can deliver a decisive competitive advantage faster, more seamlessly and more effectively. With this in mind, how do you choose the right integrator?

    Selecting the right system integrator

    While FIs and FinTechs lack the capacity and expertise to successfully integrate new offerings, they each bring their own set of unique strengths to the partnerships. The right integrator will understand the strengths each side brings to the table, and make them shine.

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    Image Source: Report from the Center for Financial Inclusion at Accion and the Institute of International Finance

    In order to ensure that the strengths of each partner in the ecosystem come to the fore, the system integrator must understand the domain in which the traditional FI operates. This means, among other things, a nuanced understanding of their brand promise and customer base, the ability to meet the stringent risk mitigation requirements of a large FI, and the ability to operate with robust, though sometimes outdated, infrastructure. 

    By the same token, they must be able to work at the pace of a FinTech, with their disruptive mindsets, focus on agility, and high technological expertise and inventiveness. The right integrator will be as comfortable in a suit as in a turtleneck and equally eloquent in the boardroom and over the foosball table. 

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    Above all, however, they must be backed by proven experience. For example, my own organization, Vega IT, is in the system integration business. More than 15 years in, and with more than 300 successful system integrations, we’re able to help our customers - FinTechs and FIs alike - avoid the common pitfalls of large integrations. We know how things go badly, and we’ve honed best practices to prevent such derailments - so that you don’t have to learn on the job, and on your investors’ time and dime.

    Whether you’re a FinTech unicorn or a traditional FI making a bet on one, choosing the right system integrator is a must. It is a potentially decisive competitive advantage or a sword on which even the mightiest of unicorns have fallen – and who doesn’t want a unicorn story to have a happy ending? 

    Nebojsa Djurdjevic Author
    Nebo Djurdjevic Partner & Chief Strategy and Innovation Officer

    Entrepreneur and executive leader with over 25 years of global fintech experience and passion for partnerships that unlock growth and create value.

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