When Black Friday peaked on 24 November, retailers weren't the only ones closely monitoring their performance stats. The huge surge in transactions triggered by the annual discount frenzy also provides UK plc’s finance infrastructure with a vigorous workout. It’s the digital equivalent of the days when Britain’s electricity grid would tremble as millions of people put their kettles on after a big TV show. And for CTOs responsible for building their own finance apps or platforms, moments like these can also bring a surge in adrenalin levels.
I was thinking about this recently during a conversation with a client about the pros and cons of building a lending platform compared to buying one off the shelf. Most finance start-ups do of course choose to build. They want full control over the system’s features, they want to differentiate themselves from the competition and they’re thinking about the process from the top down. In other words, they know what they want the interface with their customers to look like and they know the data they want to be able to extract. When you start a project from that perspective, it’s understandable that everything else in the build flows from that and you’re tempted to start doing it yourself – particularly if you have an enthusiastic CTO who has the knowledge to undertake the project and is keen to rise to the challenge.
When things get messy
But of course, building your own platform comes with many potential problems. It will undoubtedly stretch your resources, almost certainly requiring you to recruit additional people. Yet as the industry faces an increasing talent shortfall, it’s harder to get skilled developers on board – and more expensive. The reality is that self-build almost always takes longer and costs more than expected, with various pitfalls lurking along the way.
There’s also the issue of scale. A self-built platform may work for a few years for a start-up, but as the business grows (and both the market and regulation evolve), there’s often a growing awareness of a need to migrate to a platform that’s fully fit for changed circumstances. And with every year that slips by, that process can become more complicated – which is why some companies end up running the book down on their old platform while originating fresh loans on a new one. That’s messy.
At the other end of the spectrum is the ‘buy’ option. There you have it – a shiny new platform, tried and tested, off the shelf. The attraction here is clearly convenience. The downside is being stuck with what you have, rather than being able to tailor the platform to your specific needs as a lender. As a result, it’s not a very popular option.
The third way
But there is an alternative. We’re now working with many clients to deliver a blend of ‘build and buy’ that gives them all the tailored features and distinctiveness they need, while overcoming the most challenging elements of self-build. By taking this approach, the lender has full control over the presentation, management, flexibility and monitoring of their lending services. Yet the foundations of the platform are built by Lenvi’s team of experts in technology, the market and compliance. This is technology that is tried and tested in a way that self-build can never compete with – particularly given the level of regulation in the industry, and our knowledge of building that compliance into a scalable platform.
Importantly, choosing this type of ‘build and buy’ also creates considerable elasticity within your platform – something that’s very difficult to do from scratch. So when a huge surge of loan applications appears before or after Christmas, your CTO doesn’t need to worry whether the system can cope. And as Black Friday looms, there might be quite a few people across the finance sector who are envious of that peace of mind.