John San Filippo
Fintech Meetup 2023 Panel: Build vs. Buy
Updated: Mar 24
By John San Filippo
From March 19-22, Fintech Meetup held its first in-person conference, which was convened at the Aria Hotel and Resort in Las Vegas. The two previous iterations, in 2021 and 2022, were both virtual events.
Like its virtual predecessors, Fintech Meetup 2023 centered on 15-minute one-on-one, face-to-face meetings. However, there were plenty of breakout sessions, separated into four tracks daily, held March 20 and 21.
The March 20 tracks were:
Consumer Banking and Personal Finance
Platform Infrastructure and APIs
Banking as a Service and Embedded Finance
The March 21 tracks were:
Risk, Security and Identity
Banking as a Service and Embedded Finance
Blockchain and Crypto
B2B Payments and Finance
What made these sessions compelling is that rather than rely on one person’s ideas, each session was conducted as a panel discussion with multiple experts as participants. One such discussion, part of the Platform Infrastructure and APIs track, was called “Successfully Navigating Today’s Build/Buy Fintech Infrastructure Decision.” The discussion was moderated by Joseph Cody, principal and banking information leader at Deloitte.
The panelists were:
Brinda Bhattacharjee, Chief Operating Officer for Transaction Banking in Platform Solutions at Goldman Sachs
Biswarup Chatterjee, Global Head of Partnerships & Innovation, Treasury & Trade Solutions at Citi
Peggy Mangot, Head of Fintech Partnerships, Commercial Banking, at J.P. Morgan
David Foss, Board Chair & CEO at Jack Henry
Staying Ahead of the Curve
Cody opened the discussion by asking the panelists how they “stay plugged in,” given the tremendous amounts of information with which they’re presented daily. “Of course, Twitter,” said Mangot. “But seriously, there's not too much information. It's a, lack of good filter. I do have a curated filter for what I read, who I take seriously. Because it’s our job to understand the trends and understand how these trends impact our business.”
Cody then turned to Foss. “I'm the only non-bank on the stage here, so my job is to try and anticipate what our banking clients are looking for,” said Foss. “We have industry research group at Jack Henry that is focused on trying to follow what is happening with the various fintechs out there and marry that with what our bankers looking for as far as technology solutions that will help them serve their clients.”
Chatterjee spoke to the importance of having a reliable network of trusted advisors. “It's always been the people,” he said. “If you know the people behind the idea, that matters more potentially than the idea itself. I rely on people that we've worked with in the past. That could be the venture capital firms, it could be our own colleagues, our own network of startups. The key really is people that understand business.”
Build, Buy, Partner
The importance of the people involved with a solution carried over as Foss began to discuss Jack Henry’s strategy for acquiring tech companies. “Knowing the reputation of the founder, knowing if they know what they're doing, if they’ve established themselves with a good reputation of being a quality provider – that is certainly a key for us,” said Foss. “For us, culture is always top of list. Is this a cultural fit or not? We're very insistent on, we don't just buy technology, we buy companies that include people.”
“There are banks that are intent on a build-first strategy, where buying a solution is absolutely only a backup to not being able to build it ourselves,” added Cody. “Then you have the opposite strategy, which I want buy. But both of those strategies now are sort of lending themselves toward acquiring, right? The builders like owning things. Buyers are focused on what else is out there. Acquiring makes sense [for both strategies].
“We've been pretty focused on trying to stay true to our original philosophy of do what we do,” added Bhattacharjee. “We do a few things and we do them well. We add onto our platform with other specialists where we need to. And so that philosophy is very much at play. The struggle is in ensuring that the product and technology philosophy that you have as part of your core platform plays out whether you go down the buy path or down the partnership path.”
“Of the partner versus build decision, the big reason it's changed is that banks used to require everything to be on-prem,” noted Mangot. “So, there were lots of partnerships that we couldn't do back then when I was at Wells [Fargo] that now larger banks can do because there's more acceptance of the cloud. That's a big change.”
“Take a good assessment of what your capabilities are,” stated Chatterjee, observing that many variables can affect any decision. “It's all about the right strategy, the right time, the right opportunity. You have to take a lot of that into discussion. You look at the same situation, thw same opportunity, but given the constraints where you are right now, the decision might be different.”
“We're a 46-year-old fintech, so we've been through a few evolutions,” added Foss. “We went from ‘build everything ourselves’ to this real focus on acquisitions. We got away from building a lot of technology. But sometimes the deciding factor can be, is there anything to acquire?” Foss explained how Jack Henry identified a need for a cloud-native treasury solution, but couldn’t find any viable acquisition targets that offered such a solution. Jack Henry was forced to build the solution. He added that Jack Henry seldom partners with other companies on a joint solution due to the potential reputational risk if the other company doesn’t meet Jack Henry’s service standards.
Noting that Goldman Sachs has successfully partnered with Stripe to develop joint products, Cody asked Bhattacharjee to discuss that relationship. “It was one of these situations where two companies may operate in the same ZIP code, but actually major in very different things,” explained Bhattacharjee. “Stripe clearly has a customer base that is very distinct from the type of customer base that Goldman Sachs has gone after. One of the entry points to bringing us together was that realization – that together we can do something that neither organization was able to do on its own.”
She continued, “As we've developed the product lines that we've worked on together, one of the things that we've always tried to do is keeping each other honest. We're constantly keeping each other honest by taking into account what we're hearing from our joint customers and pushing the ball ahead on what we've co-created together. Having a partner at the table who's willing to operate in that way and be agile and nimble and responsive to customer feedback has been a big part of what's made it successful.”
“We have a partnership with Paymentus [Corporation],” added Mangot. Paymentus powers our commercial bank customers’ electronic bill presentment and payment so our commercial customers can enable bill payment for their consumer customers. That's been a tremendous partnership. We're very proud of it.”
What About Big Tech?
Cody then asked the panel to comment on Big Tech’s place in the financial technology landscape. “Traditionally Big Tech does great in making efficiencies — taking processes that look very clunky and applying new technology to speed up stuff,” said Chatterjee. “For example, if you look at networking communication, whether it's instant messaging or other forms of networking, they were all developed by Big Tech, but now the financial industry is using those rails to kind of partner with Big Tech. Both bring very unique things to the table and I think it's that intersection is really the sweet spot. I don't look at them as competition.”
“You've seen several instances in the past five years even of Big Tech thinking, ‘Hey, it would be cool to be in banking. It'd be fun to be a disruptor in banking. Let's go try that,’” noted Foss. “And then they get in banking and realize, ‘Wow, this is really hard and this is not fun. Maybe we shouldn't do this.’ Five years ago, six years ago, players that I was concerned about being competitors to our customers – not to Jack Henry, but to our customers – today I look at totally differently because I think they've found their way toward where they can really help financial institutions be successful, but not be a disruptor, not be competitive with the financial institutions.”
As the session grew to a close, Cody asked what technology trends or developments the panel finds “scary.” There was consensus around artificial intelligence (AI), but not for the reasons that are commonly discussed. “What scares me is generative AI,” said Mangot. “But I'm not scared of job reductions and things like that. We'll figure that out. I'm really scared about all the fraud.”
“As far as the scary part of AI, I would totally go with Peggy's point,” added Foss. “Maybe the optimist in me says, well, there's the unintended consequences of things that happen in AI. Then I start to think, a lot of them become intended consequences because that's where fraud comes into the picture. I think about my own kids. They're totally invested in doing everything through some kind of digital presentation layer. Where is that opportunity to take advantage of them as they grow older because of the sophistication of AI technology?”