This is good news for banks, for customers, and for innovation broadly. As a quick primer, best of breed refers to a multifaceted technology strategy by which financial institutions (FIs) shop around for the most suitable solutions for specific functions or use cases, rather than getting everything from a single vendor. This allows for a couple of things that are key to competition. First, it enables a bank to differentiate its offerings — if everyone gets their solutions from the same places, everyone ends up with the same thing. A best of breed strategy allows an FI to identify purpose-built solutions that provide unique value propositions and to plug those solutions in when it makes sense. Second, it enables an FI to focus on acquiring technology that is specific to its needs and maps to its strategy.

Given these benefits, it seems like a no-brainer to pursue such a strategy. So why is it taking so long for the industry to warm to the idea? This data is quite promising, but it still doesn’t show much urgency on the part of community bankers. The answer likely lies in comfortability — best of suite is the industry standard for many if not most institutions, and as such, comes with little risk — as well as resource constraints. But we’re operating in an environment in which consolidation is everywhere, and it presents an existential threat. As we wrote recently, it’s important to ensure competition remains in the industry, and that there are enough banks to cater to different markets — cities and rural areas.

As time moves on, we expect to see the data continue to move in the current direction. As a result, for FIs contemplating taking a best of breed approach, perhaps ask yourself, “Why wait?” If this is the direction the industry is headed anyway, why not hop on board? The typical “desire to follow” argument doesn’t work so well in this case because we’re not talking about a specific technology trend or novel area. There is nothing to wait for in the proving ground. This about a shift in strategic mindset and approach to the future.

If anything, being early is likely to be an advantage because building a best of breed approach takes time — it requires crafting a technology strategy that’s tightly integrated with a bank’s business strategy, while also creating processes for identifying the right partners and vetting them accordingly.