Build vs. Buy vs. Partner in Banking How to Make the Right Choice

Build vs Buy? Today, banks are rightly realizing that they can get the best of both worlds by partnering with nimble, innovative fintech companies — companies that give banks flexibility in the range of products and services they offer.

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When to Build, Buy, or Partner

The history of banking — like so many industries — has been a history of building and buying.

There’s nothing new about it. When a bank executive decides they need a new branch, they don’t assign their tellers or loan officers to the task. Instead, they do what they’ve more or less always done: Contract outside specialists to construct it.

What’s changed today is that banks now have full-time internal employees who can build digital banking solutions directly. This forces banks to ask the difficult question of whether they should build or buy their way through the digital transformation.

In the past, the question has often been limited to two choices: Build or buy? This narrow view has either resulted in banks developing their own digital solutions only to realize too late that the cost of maintaining these solutions is far higher than they anticipated, or it has resulted in banks buying a product from a technology company only to realize too late that they’ve locked themselves into enormously expensive contracts for solutions that don’t keep up with the times.

Today, banks are rightly realizing that they can get the best of both worlds by partnering with nimble, innovative fintech companies — companies that give banks flexibility in the range of products and services they offer.

Still, there may be instances where building or buying is also a viable option.

To figure out which option is right for you, ask how you uniquely differentiate yourself from the competition. Once you know your unique differentiator (not something generic like “better customer service”), put your internal resources there and then hire third parties to develop solutions that are already widely available in the market. After all, a solution might be strategic but also readily available from a partner. In such cases, why not reserve your resources for what makes you unique and buy or partner for the rest?

Here are some guidelines to help you make the right decision for you:

To figure out which option is right for you, ask how you uniquely differentiate yourself from the competition.

Build, Buy, Or Partner: Pros And Cons


Your ability to build your own digital banking products largely depends on four things: 1) the amount of capital you’re able to invest 2) the availability of developer talent 3) how quickly you need a product to go to market 4) the state of your particular tech stack. Without budget, talent, the right timeline, and an optimal tech stack, building is almost certainly a non-starter. With those three things, building can carry some benefits.

Pros to building

  • Gives you control over all aspects of your product (within the constraints of budget and talent)
  • Enables you to avoid the ongoing costs associated with buying or partnering

Cons to building

  • Brings a load of technical debt as you have to maintain your own codebase
  • Potentially causes a lack of focus as you work to maintain every aspect of digital banking all at once
  • Comes with the risk of creating an inferior product compared to working with companies that specialize in each separate aspect of banking


Like building your own products, your ability to buy products or companies hinges on your budget. Without a sufficient budget, buying might not be an option. Still, in the right context buying can be a smart way forward.

Pros to buying

  • Helps you avoid the long, arduous process of talent acquisition and the burden of maintaining technical debt
  • Brings specialized research and knowledge from fintech companies

Cons to buying

  • Requires capital upfront
  • Limits your capacity for customization
  • Carries the risk of getting locked into a contract with a company that doesn’t innovate as quickly as the market demands


Partnering with fintech companies gives you a range of options that aren’t available with building or buying alone. It enables you to quickly use flexible deployment options, including APIs and customizable feature sets. It also opens up the possibility for long-term collaboration and speed to innovation. With the right partner, you will be able to keep up with or even outpace the average nimble startup.

Pros to partnering

  • Enables you to build an IT team that specializes in banking while working together with external developer teams that specialize in fintech
  • Creates the option for flexibility, collaboration, innovation, and speed
  • Brings a sense of ownership and responsibility to both parties

Cons to partnering

  • Requires capital upfront and some ongoing maintenance
  • Limits some of the control that comes with building from scratch

The Future Of Banking? Partnerships

Although there are times when it’s best to build and times when it’s best to buy, the future of banking will almost certainly center around bank-fintech partnerships. Why? Because banks know the ins and outs of government regulation and industry risk better than anyone, while fintechs specialize in digital design and creating exceptional user experiences.

In addition, partnerships offer the greatest amount of flexibility. Whereas building requires a large in-house team and whereas buying carries the possibility of getting locked into a failed strategy, partnering is possible with just a limited team.

As Jim Marous, Co-Publisher at The Financial Brand, says, “When you look at most institutions today,” he says, “most don’t have the depth of experience in the areas of data and analytics, technology, and actual transformation. That’s where partners really come in handy.”

Ron Shevlin, Director of Research at Cornerstone Advisors, adds that financial institutions tend to be tragically understaffed when it comes to actually implementing partnerships. “I surveyed financial services executives last December,” he says,” “and more than 50% of banks and credit unions say that partnering is a critical aspect of their overall business strategy and yet, on average, most midsized financial institutions only have two full-time equivalents in fintech partnerships.”

More than 50% of banks and credit unions say that partnering is a critical aspect of their overall business strategy and yet, on average, most mid-sized financial institutions only have two full-time equivalents in fintech partnerships.

This partner-centered approach helps banks on two fronts. First, it saves banks from the endless headaches that inevitably follow building everything from scratch. As Forrester Consulting writes, “Development teams are often bullish when it comes to how fast they think they can complete customer-facing projects, but those expectations often do not match reality.” Forrester’s research shows that 42% of development teams at banks thought they’d complete their in-house project in less than six months, while only a quarter of projects wrapped up in that time frame. Forrester writes, “The bottom line is that development teams aren’t delivering customer-facing applications and services that are quick to update.”

Second, a partner-centered approach gives banks an added measure of flexibility that can’t be reached via buying solutions alone. Again, Forrester writes, “While conventional thinking dictates that internally-developed platforms deliver greater flexibility at lower costs, actual results from transformation efforts show otherwise.”

In light of all of this, Forrester writes that “technology decision makers must abandon the traditional ‘buy versus build’ mentality, and instead adopt a ‘buy, build, extend, and assemble’ approach to creating a banking development platform that takes full advantage of the benefits of commercial components where possible.

Strategic Priority + Urgency

Partnering in this way brings together the best aspects of building products from scratch (i.e., flexibility and control) alongside the best aspects of buying products outright (i.e., a quick rollout). The concept is captured well in the following quadrant from The Framework Bank, which illustrates the advantage of choosing to partner. It also shows that anything that doesn’t have high strategic priority or urgency should rightly be deprioritized.

And here’s a breakdown that illustrates each option:

  • Build: Best if you want total ownership, a full development team, and a long timeline.
  • Buy: Best if you have a limited development team and have a short timeline.
  • Partner: Best if you want flexibility, a partial development team, and have a short or medium timeline.

Strategic Priority vs. Urgency

By merging strategic priorities and urgency via bank-fintech partnerships, traditional financial institutions can more successfully move toward digital maturity. Matthew Michaelis, Chairman and CEO of Emprise Bank, describes his experience in terms of the value he’s seen. “One of the things we find really valuable about a partnership — and it’s something that I think differentiates itself in a meaningful way from some other relationships — is that you have that two-way learning,” he says. “There are some great examples where our partners help us use their capabilities much better than we would have otherwise, just based on their learnings and what they have seen work in other places.”

When a partnership works well, this spirit of collaboration fuels innovation across both teams. As Brandon Dewitt, CTO at MX, writes, “Financial institutions can leverage third parties for their agile approach and rapid innovation, allowing them to allocate resources more strategically, expand lines of business, and reduce errors in production. These new innovations will help your financial institution compete more effectively and gives customers better, smarter and more advanced tools to manage their financial lives.” 

In short, partnering enables the best of both worlds: flexibility plus speed to market. Just look at the variety of approaches available via the MX cross-platform mobile framework, which gives banks the ability to quickly iterate, port custom features, and stand up a range of design choices. With this framework, banks can innovate in weeks, not years — and do it on their terms.

The need to partner is more urgent than ever as competition from external forces heats up. As JPMorgan Chase CEO Jamie Dimon says, “It is completely clear that, increasingly, many banking products, such as payments and certain forms of deposits among others, are moving out of the banking system. In addition, lending in many forms —including mortgage, student, leveraged, consumer and non-credit card consumer — is moving out of the banking system.”

To illustrate this shift, Dimon’s 2020 annual shareholder letter shows how, over the course of just a decade, Big Tech has ballooned from $0.5 trillion to $5.6 trillion, payments companies have ballooned from $0.1 trillion to $1.2 trillion, and private and public fintech companies have ballooned from being essentially non-existent to $0.8 trillion — all of which is encroaching on traditional banking.

“Neobanks and nonbanks are gaining share in consumer accounts, which effectively hold cash-like deposits,” Dimon writes. “Payments are also moving out of the banking system, in merchant processing and in debit or alternative payment systems.”

He adds, “As the importance of cloud, AI and digital platforms grows, this competition will become even more formidable. As a result, banks are playing an increasingly smaller role in the financial system.”

This shift in the competitive landscape took a heightened turn in 2020 in the wake of a global pandemic that made digital banking more acceptable than it ever had been. In our Ultimate Guide to the Top 2021 Banking Challenges, for instance, we found that 87% of consumers say they visit their bank branch less often and 89% say they use mobile banking more often than they did before the pandemic.

American Banker cites data from BAI that shows something similar, with PayPal in particular jumping swiftly when it comes to the number of Americans who trust the company to handle their financial needs, while the number saying the same of their primary bank plummeted. 

Warming up to Big Tech

What does all of this mean for traditional banks?

For Jamie Dimon and JPMorgan Chase, it could mean acquisitions. “Acquisitions are in our future,” Dimon writes, “and fintech is an area where some of that cash could be put to work – this could include payments, asset management, data, and relevant products and services.”

For banks without enormous cash reserves, however, acquisitions are a bit tricky. In such cases, the answer almost certainly lies in developing a network of partnerships with fintech companies. In this way, banks and fintechs will end up collaborating to best help end users.

As more people think of banking as a digital activity, fewer feel the need to stick with a traditional financial institution over the latest fintech company. For instance, when we surveyed people about whether the pandemic restrictions have made them more or less likely to use banking services from a fintech company, 30% said the restrictions made them more likely and 9% said the restrictions made them much more likely.

The reasoning from the customer’s perspective should be clear: The pandemic has often forced them to use digital banking channels more frequently, making them more accustomed to this mode of banking.

However, the situation isn’t necessarily dire for traditional financial institutions. After all, people still demand the service-oriented approach that leading financial institutions specialize in. To get a sense of this demand, we surveyed people at the outset of the COVID-19 shutdown (March 7, 2020) about whether a simple and easy digital experience or a friendly and helpful staff was more important to them. Then we asked the same question four months later (July 11, 2020). We found that the numbers more or less held steady, with a slight increase of 3% of respondents saying that a friendly and helpful staff is more important.

Screenshot 2023 01 27 at 2.11.22 Pm

This data may be surprising during a time when people are relying on digital banking more than ever before, but it speaks to the ongoing importance of having the expertise, knowledge, and responsiveness that the best financial institutions are known for.

In an era where the lines between banks and fintech companies are blurring, the future belongs to those who best blend these two approaches. Even during a global pandemic where the need for digital services is stronger than ever, people still want to be able to contact a human. They want technology and service.

This hybrid of banking and fintech represents the future of financial services.

As Ryan Caldwell, Founder and CEO at MX says, “If you’re a fintech and you’re trying to scale, you can’t just stay a fintech. And if you’re a bank and you’re trying to survive, you can’t just stay a normal bank. There’s going to be a new entity that’s not like a current bank at all and not like a current fintech at all. That will be the winner.”

And Sam Maule, Key Account Executive at Google and former Managing Partner at the consultant firm 11:FS, adds, “We’re seeing the morphing of different companies in the solutions that they provide and how they work together. … It has become paramount to understand how you contribute to an ecosystem.”

In short, those institutions and fintech companies that provide both cutting-edge digital technology and a helpful sta" will have the edge.

How do you do this well? Jane Fraser, president of Citi and CEO of Global Consumer Banking, says that the model of the future is “a light branch footprint, seamless digital capabilities, and a network of partners that expand our reach to hundreds of millions of customers.”

A light branch footprint, seamless digital capabilities, and a network of partners. It’d be di!cult to state the way forward more succinctly than that.