Pros and Cons of Technology Partnership Vs. In-House Software Development for Banks

Banks are increasingly relying on modern-day software technologies to operate efficiently and offer excellent customer service. Financial software development is essential for online and mobile banking, management of core banking systems, process automation, payment processing, and data security. 

One key area that requires financial software services is the global digital banking market, which will hit $30.1 billion by 2026. Banks must keep up with customer demand by implementing new, innovative software as more people adopt smart devices and real-time payments.

Banks must decide whether to handle the development process in-house or partner with a SaaS software development company to implement such modern technologies and processes. Both options have their benefits and downsides. But which one is better? Let’s find out more.


Factors to Consider When Choosing Between a Technology Partnership and In-House Development

Here are some factors to consider before deciding which software development approach to choose.


You need to evaluate how much it will cost you to develop your software in-house and compare that with the costs of hiring a third-party provider. Software development costs vary depending on the size, design, complexity, location, technology, and team.  

If you want to introduce digital payments in your bank, you’ll need more than a technological update. Therefore, if it’s more costly to use your in-house IT team, you might have to opt for a third-party payments partner to handle the process. 


Before developing the software, consider what you need it to do. You should also check if there’s a plug-and-play product already available for purchase that handles the exact needs. For instance, if you are looking for payment technology that accepts ACH and credit card payments, some reliable third-party providers offer such services. 

Additionally, you need to consider if your in-house built solution has the functionality and flexibility for commercial banking. The need and demand for faster payments also mean banks must have ISO20022 in place. It would be best if you had a SaaS software development partner that could implement this in your bank. 


Apart from the costs, you need enough time to develop this software. It could take months to build efficient software from scratch. This could be a disadvantage in the world of real-time payments because most modern customers are actively looking for options that allow them to make payments quickly and securely. Therefore, getting into a technology partnership could be better if you need to develop software from the ground up.

Security levels

Financial institutions reported 703 cyber-attack attempts per week in Q4 2021. The rise in such cases means that banks must protect themselves from data breaches. Before building software in-house, banks must consider whether they can handle potential security risks.

Third-party providers might tackle cyber threats much better. Choose a provider with PCI compliance level 1 to protect customer data and information. A company with level 1 compliance offers maximum security, which is a must while processing credit card payments for commercial clients. 

Become a Partner


What is a Technology Partnership?

Technology partnerships take two forms. The first involves hiring software development services to develop custom software from scratch. In this situation, you may save time but spend a lot more. The second involves working with a third-party product company with a ready plug-and-play product with room for custom development. The second method helps you save both time and money. Partnering with a reliable third-party vendor with a robust product allows you to focus on the core banking activities and divert the other roles to your partner.

So what are the benefits and downsides of choosing this option?  


  • Cut Costs: When you partner with a third-party vendor, you only pay the company for the services offered. You can work with a provider virtually without providing office space and equipment while using their payment processing services like IVR, SMS, recurring payments, or hosted payment portals.
  • Scale Faster: Since you have an external party handling the software services, you scale your financial operations much quicker.
  • Improve Efficiency: You don’t have to train your in-house team. The technology partner specializes in this area, improving the bank’s efficiency.
  • Cut Down Implementation Time: You start processing real-time payments in a few months or less because the technology is already available. 


  • Less Control: When you work with an external provider, you have less control over the software development process. You are entirely dependent on them and their expertise.
  • Poor Marketing Knowledge: The team might be more project-oriented affecting how they understand your brand’s marketing plan.


Best Practices for Outsourcing a Technology Partner

Choose the Right Partner

Your technology partner should be reliable, knowledgeable, and have a history of delivering the best services. You must ideally work with a Nacha-preferred partner that provides integrated payment processing technologies to promote enhanced business processes.

Communicate Your Expectations

Since the team is not in-house, you need to communicate the exact services you need. You must choose a cloud technology provider to create custom-hosted payment technologies, especially while serving commercial customers. 

Evaluate the Software Services You Need

Statistics show that in the U.S., mobile banking has a 95% penetration rate among Gen Z. Therefore, you must partner with a fintech provider that is tech-savvy and knowledgeable to develop innovative payment solutions for the younger audience. 


What is In-House Development?

In-house development involves working with a team within your bank. Instead of getting external help, you assign your IT department the task of developing the software for you. You’ll need to assemble a team of project managers and software specialists to deliver.

What are the pros and cons of working with an in-house team? Let’s find out.


  • Direct Communication: Since the team is part of the bank, you can brief them quickly and eliminate any errors caused by miscommunication. 
  • Competitive Edge: If the software is part of the business’s core purpose, it might be better to build it in-house. Internal teams better understand what the company needs and how to stay ahead of the competition.
  • Compatibility: In-house software developers are more aware of the bank’s pitfalls and room for improvement. They will be more committed to achieving these goals.


  • It’s Costly: Compared to partnering with a third-party vendor, a one-off payment, in-house development costs are long-term. You need to pay salaries, cater for team training, and buy equipment. 
  • Expertise Issues: Your in-house team may not have the skills to handle all areas of software development. For instance, if you need to develop a payment platform with one virtual login to process ACH payments, you’ll need to hire a more specialized team in this area. Working with a Nacha Payments Alliance member will help you overcome such challenges. 
  • Time-Intensive: Developing the software in-house takes a lot of time. You must train your staff and give them time to perfect the technologies. 
  • Security: Banks should help clients pay online securely. The risk of losing customer money and data increases exponentially if your in-house team can’t handle potential security breaches in your system.

How to Build An In-House Team

If you have decided to go with an in-house team, here are the steps you should take to build the team.

  • Send out job offers in the bank
  • Evaluate the resumes
  • Conduct interviews
  • Pick a team



Real-time payments are the future. Services like FedNow will get introduced in 2023 to help banks and other financial institutions offer efficient instant payment services. You need the right software to provide these services to your customers. 

In-house teams are costly, time-intensive, and sometimes lack the proper expertise to implement innovative payment solutions. However, partnering with a reliable payment processor like iCG helps you access a platform with multiple plugins for accounting and managing back-office solutions.

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