When considering whether or not a financial institution should outsource the ever-growing demand for data analytics services, there are a few things to keep in mind. First of all, financial institutions, no matter their size, can benefit from implementing a data analytics strategy. In the current market, financial institutions need to stay ahead of the demands of their consumers by ensuring their solutions, product offerings, and marketing efforts are relevant and timely. Since the institution already has the information, it is simply a matter of defining and implementing the right strategy that will mobilize that information into effective tactics.
So how does an institution go about building that strategy when resources are unavailable? One option is to outsource functions to a third party vendor. Let’s consider some of the pros and cons of engaging a third party in this process. First, the cons.
- The financial institution would not be the sole manager of certain business functions.
- The financial institution adds some risk if the third party company were to file for bankruptcy, which could lead to services being halted, needing to employ legal counsel, and/or other issues.
- Engaging with a vendor that does not have appropriate controls in place can expose the financial institution to significant information protection risk.
- The culture of the third party company may not align with the financial institution causing friction.
While these are significant considerations to take into account, let’s consider the pros before making a judgment.
- Considering the cost associated with data analytics services, engaging a third party could release capital for investment elsewhere in the financial institution.
- By partnering with a vendor, the financial institution is likely to save on research, development, marketing, and distribution expenses.
- The financial institution could avoid having to hire additional people to support the initiative.
- Bringing on a third party can allow the financial institution to focus on what they do best – offering relevant financial solutions and services to its members.
In conclusion, while there are risks to take into consideration when engaging a third party, the potential benefits and savings for the financial institution exceed them. Conducting proper due diligence can equip financial institutions with the information necessary to effectively evaluate potential third party partners. This step is critical in determining whether a vendor can meet a financial institution’s data analytics strategy needs.