Bankers with a single- or minimal-vendor approach are stuck with the “single-provider paradox.” They may find a single vendor that on paper provides all their technology needs. But no single vendor offers the best or most complete suite of products in the face of quickly evolving third-party solutions for a bank’s many needs and functions. In the long run, the single-provider solution causes banks to fall behind the most digitally savvy players. Successfully anticipating the future depends on vendors that enable and encourage diverse options for any function.

As we’ve written, a best of breed strategy sets the foundation for crucial long-term evolution of a bank’s tech stack. But that strategy first demands a shift in leadership’s mindset from a vendor-driven, product-based roadmap to a carefully planned, internally driven innovation strategy. This approach, in which banks are free to add, remove, or upgrade third-party features and services of their choice, depends on a composable core; middleware that abstracts a legacy core; or extensible “over the top” solutions.

Technology shifts can be uncomfortable, but banks need ongoing modernization to thrive. There’s no magic wand. Articulating a specific, measurable, and achievable best of breed strategy is easier said than done. It’s easy to cast too wide a net for technology priorities, be distracted by point solutions, or as we’ve discussed at length, get swept up by buzzy technology trends. It also requires infrastructure partners that rapidly and enthusiastically iterate on their own offerings to stay ahead of the curve.

Moreover, the single-provider paradox occurs not just because working with one provider is easier; banks may feel that’s their only option, given their budget and negotiating power. That conundrum feeds into bankers’ dissatisfaction with their core provider, the struggle to take advantage of new technologies, and nerves about adapting to fintech competition.

With luck, a bank’s legacy core provider will open its ecosystem to third-party solutions, laying the technical groundwork for a best of breed strategy. With the right contract terms in place, bankers may augment their cores with modern, third-party architecture and implement API-based, up-to-date solutions, before potentially converting to newer options. The key, however, is organizational. Best of breed starts with clear business goals and comfort with a vendor-agnostic approach to bank technology.