Last week, Cyoda and NewFinance hosted a lively panel discussion on this topic, with four compelling speakers sharing different perspectives.

For those of you who missed the evening, here’s a quick synopsis:


Moderator: Eddie George (NewFinance)

Firstly, the panel were quick to expand the scope of discussion beyond ‘fintechs’ (the original title of the event) to include the buy/build decisions of major financial institutions.  Whilst this hadn’t been the path I’d envisaged, it seemed fitting in a post-Libra world where the boundaries between tech and FS are becoming ever more blurred.

In the enlightening and entertaining discussion that followed, 5 key themes emerged:

1. Focus on what the business needs

There was broad agreement that whether you’re a global institution or a tiny start-up, the drivers of the buy/build decision should – theoretically at least – be very similar, with the fundamental start point being absolute clarity on what the business needs.  This means knowing where your expertise lies, what you can do better than anyone else, and getting comfortable with outsourcing the rest.

2. Disciplined Thinking

Of course, the real world (especially within large, established institutions) can prove a little messier.  Jonny observed that large banks tend to ‘flip’ from buying everything in-house to outsourcing everything, in the same way that ‘Generals tend to fight the previous war’. He also pointed out that rational decision-making may be subverted by in-coming leaders wanting to leave their mark by instigating change for change’s sake, or by developers seeking opportunities to play with the latest whizzy toys.  Alastair spoke of flawed incentive structures within large banks which reward short-term thinking and empire-building, rather than making the right decisions for long-term performance.

Gabrielle pointed out that the need for disciplined thinking and sticking to strategic objectives is equally relevant for start-ups. She suggested that young firms often over-promise and under-deliver to themselves, and that buying-in non-core tech helps to keep them on track and maintain discipline.

3. Know your control appetite & manage your risk

Do you really need to control everything directly? – Are there standardised activities which are better shipped by someone who specialises in doing them really well? – Gabrielle suggested new firms need to get clear on their “control appetite”.

Ruth spoke of how she’d advised firms across the spectrum from ‘buy everything’ to ‘build everything’.  She reckoned either could work; vendor risk can and must be managed just like any other business risk. Nevertheless, start-ups will always need a basic level of tech expertise in-house; you can outsource the activity, but not the responsibility for it.

4. Check your emergency exits

Jonny discussed how firms are increasingly keen to avoid vendor lock-in.  Of course all vendors are seeking reliable recurring revenues, but these are best secured by becoming the very best within a specific niche, rather than erecting high barriers to exit.

Alastair also spoke of how vendor fatigue could be mitigated through ‘aggregating platforms’ and one-stop-shops, in which buyers could access an array of applications from multiple vendors via a single gateway. This benefits buyers by making it easier to swap providers, but also vendors in making it easier to access buyers.

5. What might the future look like in 5-10yrs?

Ruth reminded us that the buy v.s. build decision is fundamentally nothing new, it’s the scope of opportunities offered by technology that is growing exponentially.  That means it will become increasingly difficult for even the largest firms to keep pace with all the new developments in-house.

Indeed, all agreed that the need to ‘focus, focus, focus’ would become ever more important as our world becomes increasingly technologically complex – which would inevitably lead to a shift from ‘build’ towards ‘buy’. Indeed, Jonny suggested it was imperative that traditional banks outsource more activities to specialised vendors if they are to compete with the likes of Facebook, Apple & Google.

Ruth made the point that it was a case of ‘when’, not ‘if’ we experience the first failure of an FCA-regulated new digital bank.  Given that technology is core to these firms, it seems plausible that it may prove a contributing factor…something which could have major fallout for regulators and vendors alike.

Finally Jonny closed with a comment that incurred much head-nodding from the rest of the panel (and from other Gen-Xers, like myself in the room).  The digital revolution has sucked many people out of bank IT, such that the average career longevity is now less than a decade. Institutional memory of the last crash is fading fast, which spells dangerous times ahead…


A huge thank you to all the speakers and to Eddie for moderating. Cyoda is planning to run a similar event later in the year – so watch this space!