Virtusa’s Open Innovation Platform helps banks drive innovation with fintechs

Most banking and financial services (BFS) firms simply cannot afford the massive distraction and huge expense of overhauling decades of legacy systems and processes. Instead, build, buy, and compose is becoming the innovation mantra for banking and financial services (BFS) firms vying to compete and operate effectively in the digital BFS environment.

Traditional BFS firms now view fintechs as friends, not foes

Fintechs, once thought of as dangerous disruptors, are increasingly regarded as enablers by established BFS firms plagued by legacy systems and processes—and hungry for innovation. The intersection point is often the BFS firms’ use of fintechs to drive legacy modernization at the edge by complementing and extending core systems.

Fintechs plus microservices and API integration can breathe new life into legacy technology and drive interesting digital innovations in the process. But fintechs seldom solve entire problems. They are typically elements of broader solutions that need to be vetted and tested before earning the right to integrate into composable digital solutions. The concept of “composable solutions” means using fintechs and other technologies as building blocks. Timely fintech examples include digital banking examples such as e-signature, payments, KYC functions, and biometric-enabled identity management.

Service providers play an emerging role as BFS ecosystem orchestrators—curating and managing fintechs—but there is a real need for more visible and transparent testing and validation processes before fintechs are invited into ecosystems.

Virtusa leverages its product development heritage to help validate and test fintechs before baking them into services

As part of the research effort for our recent Horizons report, The Best Service Providers for Retail Banks, 2023—Disruptors, Enterprise Innovators, and Market Leaders, Virtusa briefed HFS on its retail-banking-focused services, relevant enabling intellectual property (IP), and partnership ecosystem. It showcased its Open Innovation Platform (OIP), a productized solution born out of the needs of banking and financial services firms to rapidly ideate, experiment and create digital products and services—working to strike a balance between build, buy, and compose—in a sandbox environment purpose-built for financial services.

While the focus of the OIP is broader than fintech testing and validation, HFS was struck by the ability of this tool to help BFS firms safely grapple with fintech assessments. And because Virtusa is a service provider, not a product company, it can manage the fintech testing and vetting as part of its services scope, fast-tracking the ultimate outcome—digital innovation in the form of banking products or services.

Fostering co-innovation with clients and partners

Virtusa initially built OIP as an internal accelerator to help manage its own ideation and product development cycles. The firm then fashioned it into an accelerator for its financial services clients to help drive co-innovation with clients and external partners like fintechs. Along the way, it developed several banking-specific AI models (e.g., default prediction and fraud detection), workflows (e.g., customer onboarding, KYC), and a smart bank data model. It loaded OIP up with relevant APIs and synthetic data so it could serve as a sandbox environment.

After continued use with BFS clients, Virtusa productized the offering as the Open Innovation Platform in 2021 with a related sub-component called the Digital Product Workbench, which allows innovations to move from interesting ideas leveraging design thinking to actual product development, with a heavy focus on reuse helping to accelerate cycle time.

Use cases favor fintech vetting and LEGO-brick MVPs

Virtusa has used OIP with about 10 clients. It often brings OIP in as a differentiation tool with most large clients to showcase the art of the possible and then leverage it as part of service engagement, driving improved product development cycle times by 25%–35% based on component reuse.

In a recent engagement, Virtusa used OIP with a large UK bank that wanted to develop a mobile wallet with an informed understanding of what had to be built versus what could be assembled—sort of a LEGO lab for minimum viable products (MVP). Other examples include building an open banking sandbox for a UAE bank to bring together developers and fintechs, developing an open API exchange for BIAN (Banking Industry Architecture Network), running hackathons, and serving as a conduit for digital twins leveraging its synthetic data.

The Bottom Line: Safe and rapid experimentation with fintechs can help BFS firms advance digital innovation.

Given the lengthy onboarding cycles that are still the risk and regulatory norms of BFS institutions, Virtusa’s OIP and services combo offers firms an opportunity to road-test and de-risk fintechs ahead of one-year-plus onboarding processes and then use them in Virtusa-developed digital products and solutions.