As we wrote in our report “Successes in Transformation,” tactics that support innovation depend on both people factors and technical factors. People factors include the right hires, clear objectives defined by senior leadership, an environment of open mindedness, and an operational structure that supports continuous development. The technical factors often involve issues with legacy infrastructure, some of which the bank may need to solve for itself, and others that may require new partners. Both factors take time to address, and for some FIs, it’s an uncomfortable amount of change.

That process of planning, implementation, and normalization starts with structuring the organization to innovate. Innovative solutions may not even get on the agenda without the right mentality, sufficient expertise, and buy-in from the organization. Management’s deep understanding of its FI’s tech stack and its capacity to support fintech integrations follows. When the FI has those fundamentals in place, it can follow through with a technology strategy that novel fintech solutions may help fulfill. But not all fintechs fit into macro trends or the FI itself in the same way.

In the context of macro trends, bankers can divide today’s fintech solutions into two categories: Infrastructure fintechs (bank tech) and ecosystem fintechs (which connect to the FI’s technology to access data, products, or services). Those two categories increasingly overlap as infrastructure supports interactions with the fintech ecosystem via open banking or Banking-as-a-Service. That overlap is crucial particularly for banks that are exploring alternative distribution models and for correctly anticipating their customers’ desire for secure access to their financial data via nonbank solutions.

The ecosystem model has driven changes to a monolithic model for bank tech. First, the ecosystem itself is two-sided: There is ecosystem infrastructure, which enables interoperability with third parties, and there are ecosystem partners. Those partners may either be product or service-focused, like with BaaS users, or data-focused, like with apps that use open banking data. Second, the model for core banking is changing as next-generation infrastructure ties “traditional” core technology and ecosystem interoperability into the same system.

Amid those macro trends, and even for bankers enthusiastic about following them, there are sticking points to implementing a business strategy that includes working with fintechs. The biggest is likely the modernization budget, followed by inertia, fear of the unknown, or analysis paralysis. The last is the final roadblock: As we wrote, the freedom to choose integrations from fintechs or other providers requires a framework for decision-making and the capacity to evaluate products that meet the FI’s needs. For fintech solutions, that capability requires leadership’s deep knowledge of the fintech market, a nuanced vision for the bank’s technology stack, a detailed plan for the integrations they plan to add, and the right processes in place to evaluate options and onboard choices.