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India’s tryst with fintech has strengthened over time. With an adoption rate of 87%, significantly higher than the global average of 64%, India ranks first in embracing fintech.
What does this mean for traditional lenders? A good number of people may barely notice if physical banks were to vanish, thanks to the myriad choices online. Exciting digital financial products and services are increasingly luring even prompt branch visitors towards online platforms. This is especially true against the Covid-19 backdrop, where lockdowns accelerated the need for accessible online alternatives.
Therefore, traditional lenders feel the pressing need to move past legacy systems and work out ways to improve their offerings to match rapidly changing customer expectations. This is where tech organizations come in. They can help lenders restructure and shift to customer-centric business models. Moreover, fintechs can help lenders downsize their bloated back offices, align processes with business strategies quickly, and leverage lean credit-assessment approaches.
Generally, partnership is the preferred option as it enables both parties to leverage each of their core capabilities across functions. However, the very foundation of this partnership gets its structure and strength from the underlying tech framework and programming languages.
That’s why the core technology stack can make all the difference — from shaping the lending business to determining what kind of products can be built and how efficiently they work.
What’s a tech stack and why it’s important
Tech stack is a carefully designed bundle of programming languages, frameworks, databases, front-end tools, back-end tools, and applications connected via APIs used to achieve a specific goal.
The technology and workflows needed are often unique to each business. Some may leverage technical resources effectively while others struggle to move beyond the fundamentals, despite use of digital tools. This disparity is generally a reflection of the differences in the ability of their respective tech stacks to address specific workflow issues.
When choosing the right tech stack, you may face several trade-offs — some solutions save time but allow for less customization, others are more scalable but may need heavy maintenance. If you are an early-stage company, you might lean towards low-cost, flexible options that you can upgrade and modify at a later point in time. A larger lender may prioritize maximum scalability, so they can meet the demands of enterprise customers. Therefore, it's likely that an off-the shelf technology stack may end up being the ball and chain rather than the enabler.
That’s why you need a technology partner who can assemble a stack that can meet your immediate requirements as well as evolve with your business’ growing needs. In addition, it’s important for your partner to have an in-depth business understanding so that they can design an optimal user experience while building front-end frameworks; the user interface and all the client-side functionality in your product.
Hence, choosing your fintech partner ought to be a carefully weighed decision. Here are a few things you must keep in mind.
1. Customization capability
It’s most important that a fintech implementation is aligned with your business’ goals and requirements. Use cases are the building blocks of any digital transformation. Selecting and prioritizing them to drive real business impact is a critical first step. But business needs change over time. So, look out for customization capabilities of the technology company you consider partnering with. Even if an off-the shelf software fits squarely into your business, the ability of your fintech partner to deliver best-fit solutions is sure to pay off in the long term.
2. Scalability at the architecture level
It’s important that you look beyond the four walls you currently operate in and envision avenues and channels you could leverage in the future. Rather than simply install multiple ‘point’ solutions that convert analog practices into their digital equivalents, you need a tech partner who can build a stack that can reimagine the entire lending journey. Also, it’s important that the technology partner has the ability to deploy singular services that are individually scalable without affecting other services.
There’s no need to reinvent the wheel each time you have to address a new problem, whether it’s to deal with an increased load in the number of users or to absorb your growth plans. Often, a tech company that accounts for scalability at the architecture level of the application should be able to dodge any bullet with just a few minor tweaks. You ignore this, and you may have to burn your pocket each time a new need arises.
3. Flexibility to accommodate varying needs and use cases
Look out for companies that give precedence to business-led technology strategy. For instance, using one programming language across the entire stack may not serve every use case in the best possible way. It is likely that your partner company finds it feasible and scalable to build it all in one coding language, but it won’t lead to the most optimal outcome for you. More importantly, whether it’s one functionality or an entire suite of functionalities that you need solutions for, your tech partner should be able to expertly fine-tune modules of the tech stack and deliver end-to-end solutions as per need.
4. Agile tech stack
As lenders, you have got work cut out, now more than ever, as customers expect you to anticipate their needs and respond immediately. This is not easy without the aid of analytics. A tech stack that includes behavioral and product analytics will help track, store, and analyze user behavior at every stage of the customer journey. Some analyze this data in the analytics tools themselves, others pipe this data into data warehouses (some do both). These tools offer proactive insights and keep data clean and organized.
Also, lending is by no measure a simple business. One fintech partner cannot solve the entire lending puzzle alone. But what they can surely do is build a nimble tech stack that permits easy integrations, including third party applications, so as to bring you the combined strength of the entire fintech ecosystem.
5. Fraud detection tools
Digital frauds — from phishing and spoofing to account fraud and transaction fraud — are commonplace in the lending industry. Above all the nature of fraudulent activities are continually evolving. Make sure your technology partner has made enough room for fraud detection tools in the tech stack to undergo constant learning and iteration through machine learning models.
In addition, data privacy concerns are growing. Almost 71% of consumers surveyed by YouGov and ACI Worldwide are more concerned about scams and frauds owing to the shift to digital payments. Hence, it’s important that you choose a technology partner that complies with security standards. Ensure that your technology partner secures your backend frameworks by encrypting data, both in transit between servers, as well as in storage — both in the API and database tiers.
The FinBox way: Building nimble tech stacks for optimal performance
At FinBox, we run projects by taking the pod route — where a small group of self-organising people with a variety of competencies work collaboratively on the delivery of a defined product in multiple iterations. This reduces turnaround time considerably and improves efficiency.
Also, the fact that our technology strategy and selection approach is centered around strategic business objectives and performance rather than our own scalability, has resulted in the development of a diverse talent pool with competencies in a variety of programming languages. This enables us to develop each individual service in different programming languages. In addition, it has helped us achieve a high-level of interoperability among teams, equipping us to respond to business needs quickly and effectively.
Also, as an ISO-27001 technology company, we employ a slew of measures to ensure data integrity and privacy. We ensure the following hygiene measures;
Encrypt data, both in rest and motion
Tokenize sensitive data
Put in place well-defined incident management and business continuity plans
Set up data backup and recovery process
To cut the long story short, if you want to develop robust financial products, closely evaluate the nature of tools, processes, and people of your potential technology partner.