It’s a constant balancing act for community financial institutions. If you use all your software ”out of the box,” you risk looking just like everybody else. If you customize your environment too heavily, you can end up with a support nightmare that none of your vendors can help with.
In this episode of Digital Banking Podcast, host Josh DeTar welcomed Bill Kinnelly, the CEO of KGA Advisory, LLC. They discussed the pitfalls of being on a customization island, the potential problems with development, and the positives and negatives of an SDK (software development kit) approach.
No two community financial institutions are the same, so of course, no two FI technology environments are the same. Every financial technologist wants to create a user experience that’s perfect for their FI’s accountholders, not one that’s perfect for the FI down the street. Customization is one option. But whether you have your vendor do the customization or do it all in-house, customization has risks. It adds cost and it adds complexity, both up front and over time. Are the risks worth the rewards. No two financial institutions will have the exact same answer to that question either.
⚡ Customization vs. configuration. Most financial institutions want a software program that does exactly what they want it to do. But do they need customization or configuration to achieve that? Speaking from a vendor perspective, Kinnelly explained, “Customization means you’ve developed some things specific to a client, and it needs to be maintained for the entire lifetime of your relationship with the client. So, usually, we think about customization in terms of software, but it could be lots of other things that you’ve customized, like how you operate the solution or how you architect the technology. So if you do something for one client that isn’t generally applicable to a market, then that’s what we consider customization. Configuration, on the other hand, is parameters, data values, and options that come in the standard product that each client can set, but there’s no technology specific to a single buyer.”
⚡ What are the pitfalls of being on a customization island? According to Kinnelly, running a custom shop at your FI means being on a customization island. “The development of the customization is the beginning of the issue, but just on the initial go-live, on the initial deployment, you’re going to be, as a buyer, in your own process somehow because first of all, the development is its own project,” he said. “That vendor’s not creating something for the market; they’re creating something for you. But then after you’re live, there are the issues related to the maintenance of what has been developed.”
⚡ Anything that’s hard for the FI is going to inhibit sales. More customization leads to more difficulty in innovating. “The first problem [with customization] is the development of the customization. And just for the sake of simplicity, let’s stick with software customization,” said Kinnelly. “They’re hard for the vendor because their business doesn’t scale if they’re spending a lot of time customizing software, but the more important thing from the vendor’s perspective is that it’s hard for the FI. And anything that’s hard for the FI is going to inhibit sales. So the reason it’s hard for the FI is that they need to know in pretty good detail what the customization should do.”