Research from the Financial Brand found that nearly 70% of adults in the U.S. are regular users of mobile banking apps. Banks and credit unions know that a digital banking app is a non-negotiable to keep up with users’ evolving banking preferences. But not just any banking app will do. Users expect advanced features, and they’re used to the levels of personalization they receive on platforms like Amazon and Netflix. However, the question remains: Can in-house IT teams handle managing a digital banking app, or is it better to work with a third-party vendor? While internal teams may be quick to take it on, there are several benefits to hiring a third-party who can support their efforts — most notably security and avoiding overloading finite IT resources.
Difference in Cost
Third-party vendors allow banks and credit unions to establish or enhance their mobile banking domain with a lower financial investment compared to in-house solutions. Much of the savings come from not needing to employ the multiple IT professionals that are necessary to develop and maintain a high-caliber mobile banking app including developers, programmers, designers, UX copywriters and project managers.
Banks and credit unions also avoid having to purchase multiple tools and software to build their app, as a third-party partner should be all-inclusive with built-in integrations to existing systems. Even when businesses start with an open-source, customizable base, research from Gartner has found that less than half of these in-house app development investments will provide substantial cost-savings over third-party solutions.
Difference in User Experience
Users have become accustomed to performing basic banking tasks via apps such as checking balances, transferring funds and paying bills. There is a growing desire, however, for advanced mobile banking functions that provide the same seamless banking experiences that users receive inside a branch and online. This means delivering critical banking activities such as mobile check deposits, budgeting and instantaneous peer-to-peer payments, as well as facilitating investment accounts, credit cards and loan application and management. Building mobile apps from scratch would require banks and credit unions to cobble together all of these functions in a way that may not be user-friendly because the applications likely exist as multiple siloed, disparate components.
Third-party mobile banking solutions are, by design, multifunctional and highly capable of integrating with in-house legacy systems and other third-party applications. This creates banking apps that provide the increasing number of features users need while remaining easy to understand and navigate. This leads to better user experiences.
Differences in Security
Hands down, security is the most prominent aspect of a mobile banking app. A great user experience means very little if it’s easily breached. Mobile banking app security breaches can result in lost data, revenue, staff resources, and — most importantly — a hit to your reputation. In many cases, breaches are the result of outdated security protocols and software, lax authentication processes or a lack of specific security knowledge within information technology in banking.
Research by application security firm Positive Technologies found that most banks that develop their own apps fail reverse engineering checks which can allow hackers to disassemble and analyze the app for vulnerabilities. They then develop precise, effective attacks. Remarkably, the study also found that in-house software has three times the security vulnerabilities as third-party apps.
Third-party mobile banking apps are highly secure because multi-factor authentication, advanced encryption and other critical security measures are built into the infrastructure of the app. The alternative is to tack them on at the end, which opens you up to vulnerabilities.
Working with a Technology Partner
Utilizing a third-party app vendor is the equivalent of hiring a specialized team to take on all things information technology in banking app development. This encompasses the entire process including ideation, regulatory administration, security, deployment and maintenance. This option decreases the time to market while keeping the quality of the app high.
In spite of the plug-and-play nature of third-party app development, it’s still possible to customize a mobile banking app to exact specifications. Your organization can incorporate flexibility and scalability into the app that allows banks and credit unions to add, remove and adjust components as member needs change.
The mobile user experience is a key differentiator in the banking industry. Watch this video to learn more about how working with a knowledgeable partner like Lumin Digital can provide banks and credit unions with a solid mobile banking app that delivers a secure, consistent user experience.
Lauren Treadwell is a fintech writer and enthusiast specializing in cryptocurrencies, blockchain technology, innovative investment strategies and financial service startups.
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