'Bank in a Box': how even the smallest lenders can go digital

Written by Tim Bowen CEO at Mutual Vision

In an era where digital transformation is no longer optional but essential, even the smallest building societies face the challenge of modernising their operations to remain competitive. Traditional “bricks and mortar” retail banking is rapidly being supplanted by digital services offering convenience, speed, and accessibility. Where once a decent website or a sophisticated app were “nice to haves”, increasingly, they’re a customer prerequisite.

But digital banking operations don’t come cheap.? Indeed, for many small building societies, they’re prohibitively expensive.? The country needs lenders like this to thrive; the sector needs the competition; and you need to stay in business.? One way to square this circle is through the use of ‘bank in a box’ technology.?

What is a 'bank in a box'?? It is a pre-configured set of banking software solutions that can be deployed to meet the specific needs of a financial institution.? A ‘bank in a box’ includes everything from core banking systems to mobile banking apps, customer relationship management tools (that will help lenders understand their customers better, providing personalised services and improving customer satisfaction), compliance modules, and more.? At the heart of any 'bank in a box' solution is the core banking system. This manages all fundamental banking operations such as account management, transaction processing, and interest calculations.

While it’s a very promising solution to the problem, it’s not a particularly new concept.? A decade ago, the Office for Fair Trading was looking at information technology barriers to setting up new banks.? The then business secretary, Vince Cable was convinced that not only was the banking sector’s “out-of-date” technology letting down customers, the technology was holding back competition because it was too expensive for challengers and new entrants — which is an awfully similar problem for consumers as the one existing customers of small building societies face when they want to conduct their banking.

“In America there are companies providing ‘bank in a box’ IT solutions that make it much easier to set up a new bank. We need something like that in Britain,” Mr Cable said in a speech at the London Stock Exchange.? He added that the lack of competition to the big banks – whether it be from challenger banks or alternative lenders – was creating a “drag on our economic growth”.

Fortunately, lenders in the UK have access to these solutions now, too.? I say “fortunately”, because Cable had a point.? There are many benefits to the ‘bank in a box’ model.

Benefits for Small and Medium-sized Lenders

A 'bank in a box' and its associated digital transformation can significantly enhance the customer experience. Customers today expect seamless, 24/7 access to their accounts and services. By providing internet and mobile banking options, small building societies can meet these expectations, improving customer satisfaction and loyalty.? If they don’t, of course, they’re barely competing at all.

A ‘bank in a box’ can also be rolled-out quickly.? The pre-configured nature of a solution can be deployed much faster than custom-built systems. Lenders can start offering digital services within a matter of months, rather than over the course of, say, three years.? This rapid deployment helps them keep pace with larger competitors and quickly meet customer demands for digital services.

Additionally, 'bank in a box' technology is how cost-effective it is. Traditional digital transformation projects require significant investments in infrastructure, software development, and IT staff.? In contrast, a ‘bank in a box’ offers a ready-made solution that can be deployed at a fraction of the cost. This makes it accessible for even the smallest building societies or specialist lenders.? Lenders don’t have to build a new, bespoke banking platform from scratch to offer digital services. Pooling investment in technology and deployment of efficient cloud native technologies like this keeps costs down (a topic I looked at in a previous blog [link]).? As lenders are now able to onboard new business without having to rely on their traditional branch network, suddenly, they can increase their geographical reach.

'Bank in a box' solutions are also designed to scale with the growth of a lender.? As an institution expands and its customer base grows, the technology can be easily scaled up to accommodate increased demand. This ensures that the digital services remain efficient and effective, regardless of a society's size.

Navigating the complex landscape of banking regulations can, potentially, pose significant challenges to smaller building societies and 'bank in a box' solutions come with built-in compliance tools that help ensure all operations meet regulatory standards. This reduces the risk of non-compliance and the associated penalties.

Security is also important. A final advantage of 'bank in a box' solutions is that they are equipped with advanced security features that protect against cyber threats, ensuring that customer data remains safe. This includes encryption, multi-factor authentication, and regular security updates.? That protects lenders against the incalculable reputational damage they can suffer when security is compromised.

IMPLEMENTATION

So much for the theory.? How does it work in practice?? There are multiple steps to implementation and I’d like to focus on the first two.? The first step is to assess its specific needs and goals. This involves understanding the current state of its operations, identifying areas for improvement, and setting clear objectives for the digital transformation.??

The second is to choose the right 'bank in a box' vendor.? Building societies should look for a technology provider with a proven track record, strong customer support, and solutions that are flexible and customizable. It's also important to consider the vendor's experience in working with similar-sized institutions.??

At this point I should declare an interest.? We unveiled version 1 of a new cloud-native, digital banking platform, MV Solar, at the 2024 BSA conference in Manchester.??

Not only do we have a ‘bank in a box’, with well-established and robust project delivery frameworks and sector expertise, we can ensure a successful implementation which delivers to the client requirements.? By way of example, we delivered a new core banking system to Manchester Building Society in 2023 — and helped Hanley with a data migration project in 2020.? So we have a track record.

MV Solar provides loans origination, underwriting, servicing, savings origination, and facilitates the management of arrears, workflow, documents, AGMs, payments, and deeds — as well as regulatory reporting.? It's a ready-made banking platform that can be tailored to lenders’ needs — a digital ‘bank in a box’.??

I said earlier that the core banking system lies at the heart of any 'bank in a box' solution.? MV Solar is built using Mambu’s world-leading, best-in-class lending engine, which will provide the loans, savings and current account records.??

MV Solar is cutting-edge and comes with increased resilience — ensuring all operations comply with regulatory requirements and are secure against cyber threats.? Advanced analytics tools provide insights into customer behaviour, financial trends, and operational performance, aiding in better decision-making.? Frictionless connectivity and integration capabilities ensure it can integrate seamlessly with existing systems and third-party services.? We designed it to allow lenders to provide an omnichannel experience to their customers, meeting their digital needs.? It will create a competitive advantage for specialist lenders, increasing efficiencies with enhanced capabilities. It will level the technological playing field with Tier 1 players.

That’s my plug. 'Bank in a box' technology is cost-effective, quickly deployed, and scalable. By adopting technology like MV Solar, small building societies can improve their customer experience, ensure regulatory compliance, enhance security, and remain competitive in the rapidly evolving financial landscape. It offers a path for even the smallest building societies to embrace digital transformation.?

www.mutualvision.co.uk/mvsolar