Integration projects between FinTech companies and incumbent financial institutions are failing at an alarming rate, costing the industry billions of dollars and setting back advancements in client experiences by years. These failures often stem from fundamental missteps in planning, execution, and management. For advisors and clients, the result is a slower pace of innovation and missed opportunities for improved service. But failure is not inevitable.
By adhering to key principles, organizations can greatly improve their chances of success. This article outlines five critical factors that must be addressed to avoid falling into the same traps that many have fallen into before.
- Clearly define the business problem and prioritize implementation planning
One of the most common mistakes in integration projects is jumping in too quickly without a thorough understanding of the business problem at hand. The excitement of launching a well-funded project often leads to shortcuts in planning, which can doom the project from the start.-
Focus on key stakeholders
Always remember who your key stakeholders are, and ensure the project is designed with them in mind. Too often, FinTech applications are created to satisfy senior management or allow developers to showcase new technologies, but they miss the mark in terms of what clients actually want or need. A user-centered approach must guide the entire process. -
Map out impacted processes
It is crucial to document the affected processes end-to-end. This is especially true in industries like wealth management, which are burdened by unnecessary complexity due to siloed solutions. If your most complex use case is not well understood and planned for, the project is likely to hit roadblocks later on. -
Identify risks and dependencies early
A high-level understanding of potential risks and dependencies is critical from the beginning. For example, if you're implementing T+1 settlement for your firm, it’s essential to know early on if you’ll be colliding with a scheduled re-platforming of your IBOR system of record. Identifying risks early allows you to make more informed decisions and avoid costly surprises down the road. -
Involve key departments
To ensure a holistic approach, it’s important to involve operations, technology, legal, compliance, and risk management teams during the planning phase. Their input can help identify potential obstacles before they become significant issues, making the project much smoother overall.
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- Understand FinTech and vendor integration requirements
When integrating with FinTech vendors, there are several critical technical considerations that must be addressed to ensure a successful project.-
Assess architecture for customization needs
Is the FinTech solution out-of-the-box ready, or does it require significant customization? If the latter, it’s vital to know the number of integration touchpoints required. Additionally, check if the vendor has existing integrations or protocols with major market players like Salesforce or Microsoft. -
Clarify data requirements
Data is the foundation of any integration project, and if you're dealing with legacy data, every calculation that touches that data must be fully understood and documented. Failing to grasp the complexities of data structures can lead to inaccuracies that affect the entire project. -
Ensure compatibility of development protocols
Vendor development protocols need to align with your incumbent IT infrastructure. Misalignment here can lead to significant delays and project failure. Ask for documentation proving that the vendor’s protocols will work within your environment before moving forward. -
Define roles and responsibilities
From the start, it must be clear who is accountable for what aspects of the project lifecycle. Dedicated project managers are essential to ensure that all parties are kept on task and deadlines are met. -
Address security and compliance requirements
Another key consideration is whether the vendor has the resources and knowledge to handle security reviews, cross-border data requirements, and other tech-hygiene protocols. These can be significant obstacles in the integration process and should be handled by experts.
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- Properly staff your project
Resource allocation is often underestimated, but it’s a critical component in reducing project risk. Insufficient staffing or funding can create bottlenecks that slow down the entire process and lead to costly mistakes.-
Plan for resource requirements
Consider the size, scope, and priority of your project when planning resources. Do you have the necessary project management (PM) resources internally, or will you need to hire consultants or contractors? Additionally, think about whether your partners - such as IT, legal, compliance, and operations -require extra staff to support the effort. -
Prepare a Plan B for cost overruns
It’s wise to have a contingency plan in place if costs become too high. This allows you to pivot when needed without derailing the entire project. -
Ensure resource availability
Resources include finances, personnel, and equipment, as well as time. Ensure that key personnel aren’t over-committed to other projects, which could impact the success of your integration.
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- Effective leadership and governance
Leadership plays a crucial role in the success or failure of large integration projects. The importance of an engaged executive sponsor cannot be overstated.-
Inspire and engage the team
A good executive sponsor motivates the team to do their best work, keeping the focus on the greater good rather than personal gain. Their leadership can make or break a project, especially when challenges arise. -
Stay close to the details
While the executive sponsor should not be a micro-manager, they do need to stay close enough to the details to know when something is going wrong. Spotting problems early allows the team to course-correct before minor issues escalate into major setbacks. -
Be transparent and practical
An effective leader must also be transparent and willing to ask for help when necessary. McKinsey & Company reports that about 70% of integration projects fail to meet their expected outcomes, often because small issues were not addressed early. Leaders who are transparent about these challenges can help navigate the team through them more effectively.
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- Prioritize change management
A staggering number of software applications within large organizations go unused or underutilized. In wealth management, this is particularly true due to the complexity of the business model and product set.-
Build a community of “super users”
A super user community can be a valuable asset for testing and vetting applications before they go live. Post-launch, these super users can act as advocates for the technology, helping drive adoption among other users. -
Place change management consultants in key markets
Placing change management consultants on the ground in key markets ensures users have access to in-person assistance when needed. This approach has been particularly effective with CRM applications and could be expanded to other areas of FinTech integrations. -
Develop a multi-faceted communications plan
When it comes to change management, communication is key. It’s not enough to send out one message and consider the job done. The “Rule of Seven” suggests that people need to hear a message multiple times before it sticks. Use various channels—email, town halls, market leader meetings—to ensure that your message reaches the intended audience
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Conclusion
FinTech and incumbent integration projects are notoriously challenging, but they are not doomed to fail. By focusing on clear business goals, careful planning, understanding technical requirements, ensuring proper staffing, effective leadership, and robust change management, organizations can greatly improve their chances of success. As the financial services industry continues to evolve, those who master the art of integration will lead the way in delivering better client experiences and staying ahead of the competition.
Interested in reading the US WealthTech Landscape Report 2024? You can read the report online here.
ABOUT THE US WEALTH LANDSCAPE REPORT 2024
The US WealthTech Landscape Report 2024 has been designed to showcase the pivotal role that technology plays in the evolving landscape of US wealth management.
With the rapid pace of change in financial services, understanding technology's impact on this sector is more crucial than ever. This US-focused Landscape Report features a series of insightful articles that explore the trends, challenges, and innovations surrounding technology adoption in wealth management. Contributions come from a range of organizations, including Advisor360, Alpha Tech Partners, Aureus Advantage, Croesus, Diamond Wealth, ERI, First Rate, J.P. Morgan Wealth Management, Malka Media, Pirker Partners, Seismic, and Transcend Capital Advisors.
The report also features a section dedicated to a series of solution provider showcases, offering insights into the offerings and capabilities of the firms featured. This section is designed to provide an overview of a selection of solutions available on the market today, showcasing some of the available technology tools and partners that might address your business needs. Finally, we culminate the report with the directory section that introduces our online Solution Provider Directory (SPD) and references the size of market relevant to the US wealth management sector.
Interested in reading the US WealthTech Landscape Report 2024? You can read the report online here.
ABOUT THE WTLR SERIES
Our goal with our WealthTech Landscape Reports (WTLRs), is to collate relevant, insightful content and comments from both wealth managers and vendors operating in a specific region. Each WTLR is founded on a curated directory of hundreds of relevant technology and related solution providers to the business needs of the wealth management community in focus. The directory is supported by a rich variety of thought leadership articles and interviews with industry participants from both buy and sell side, plus a section of Solution Showcases. We also look at country, regional, and sectoral trends.
If you are interested in contributing to our WealthTech Landscape Report series, don't hesitate to get in touch.
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