Fact Checking: Build vs. Buy in Commercial Lending Platforms

After years of delaying upgrades to their outdated systems, many financial institutions are now prioritizing the modernization of their commercial lending servicing platforms. The key question they face is whether to build a system in-house or purchase an “out-of-the-box” solution. If you favor in-house development, your decision may be influenced by outdated beliefs. So, which is the better choice? Let's compare the benefits of in-house development with today’s advanced SaaS solutions and technology partners.

Which is more cost effective? 

Build Claim: It’s more cost effective to build in-house despite often high development costs. 

Let’s start with everyone’s biggest concern: cost. Cost effectiveness is often the primary consideration when deciding which direction to take. Initial costs, growth concerns, and ensuring you have the right people to develop, run, and maintain your technology all take a lot of capital.

The traditional argument for building in-house is that, while custom software can be costly initially, it can save money over time. The thinking is that designing your own software is the only way to meet your specific needs. Alternatively, an out-of-the-box solution not only has a significant initial capital investment but will also require costly customizations to meet your needs. Here’s why that’s not necessarily true…

Buy Reality: SaaS solutions' cost-effectiveness only increases over time. 

Developing a commercial lending platform from scratch requires substantial upfront investment in technology, personnel, and resources. Full SaaS platforms offer fixed pricing, making budgeting clearer and ongoing costs predictable. This saves money beyond the initial set up because a SaaS solution typically includes customer support, maintenance, and easier upgrades. It also reduces the workload for internal IT teams.

Which has more agility to meet the unique requirements of my organization? 

Build Claim: SaaS solutions can’t handle my bank’s unique requirements. 

A key reason to build a custom platform is the ability to tailor features to your specific business needs. The assumption is that this is the only way you can ensure that every aspect of the software supports your unique workflow, enhancing efficiency and effectiveness. 

Buy Reality: Modern SaaS solutions can easily meet unique requirements. 

“Out of the box” doesn’t mean “inflexible” anymore. For example, using a solution like AFSVision Hosted Private Cloud (HPC), users have automated workflows to streamline, validate, and accelerate servicing and portfolio management according to their policies and processes. The system also allows clients to configure new fields in real-time to easily define and add fields based on their own unique requirements. And all without programming or the need to make a formal change request. This is the new, true, face of an “out-of-the-box” solution.

Will an out-of-the-box solution meet all industry regulatory and security requirements? 

Build Claim: Only a custom-built solution can meet regulatory and industry security requirements. 

Financial institutions have specific regulatory and compliance requirements. With custom software, the argument goes, you can tailor it to meet specific requirements, minimizing the risk of non-compliance. Additionally, custom solutions incorporate security features tailored to your institution’s unique risk profile. This ensures robust protection of sensitive financial data, which is crucial in an era of increasing cyber threats. This outdated thinking ties back into the misconception that out of the box is intrinsically inflexible.

Buy Reality: SaaS solutions are better equipped “out of the box” to handle current and future regulatory requirements. 

Commercial lending is heavily regulated, and staying compliant is a significant challenge and burden on in-house resources. With modern commercial lending servicing platforms like AFSVision, there are built-in security and compliance features, so clients reduce the risk of non-compliance and minimize the need for in-house resources. And partnering with an FFIEC regulated Technology Services Provider in good standing, like AFS, you’re getting a commercial lending servicing platform designed to adhere and adjust to the ever-evolving regulatory environment. 

If I choose a SaaS solution, will it be able to meet our future growth goals? 

Build Claim: Out-of-the-box solutions are unable to grow in pace with our strategic plans. 

Custom solutions can be built with scalability in mind, allowing the software to grow and adapt with your business. This is particularly important for companies anticipating significant growth or changes in transaction volume and service offerings. A scalable custom platform ensures that your software infrastructure can handle increased demand without compromising performance. But this is also true, and even more so, with the right out-of-the-box SaaS solution.

Buy Reality: The right solution will be designed with growth in mind. 

As your business grows, your lending platform needs to keep pace. You need a commercial lending solution designed to grow with you in scale and depth of requirements. AFSVision is designed to support your growth, with built-in horizontal and vertical scaling, and robust capabilities that expand with your business. This scalability ensures that your platform can handle increasing data volumes and user traffic without compromising performance.  

Is the solution able to integrate with the rest of our technology? 

Build Claim: In-house solutions are better in achieving seamless integration with other existing technology and third-party systems. 

With a custom solution, you can avoid the compatibility issues that sometimes arise with an out-of-the-box solution. While it’s true custom platforms can be designed to integrate easily with your existing systems, that isn’t unique to custom builds. Both types can provide the integrations needed to simplify data management across the organization, leading to greater efficiency and a more unified approach to financial operations.

Buy Reality: With the use of agile APIs, web services, and other integration methods, a SaaS solution can work seamlessly with other systems. 

AFS has long understood that real-time information is essential for thriving in today’s digital landscape. Often, this crucial data originates from systems and sources outside of the central commercial lending servicing platform. That’s why AFSVision offers an ever-growing list of APIs and connectors, making it easier to integrate with both in-house and third-party systems. This allows for a seamless end-to-end experience and enables lenders to create a more cohesive technology ecosystem while streamlining system-to-system integrations in a way that will save money, resources, and time. 

Which one will get me up and running faster? 

Build Claim: In-house implementations are inherently faster, easier, and more successful. 

Custom platforms can be designed to integrate seamlessly with your existing systems. This simplifies data management and sharing across the organization, leading to greater efficiency and a more unified approach to financial operations. With a custom solution, you can avoid the compatibility issues that sometimes arise with an out-of-the-box solution. And because you’re using in-house resources to install the custom-built software, the implementation should run smoothly and quickly. But that’s not always the case.

Buy Reality: Implementing a SaaS solution managed by an experienced, proven partner is more cost-effective, can be completed on a more compact timeline, and is more cost effective. 

One of the most significant advantages investing in a SaaS solution like AFSVision HPC is the speed of implementation. First, cloud-based, fully managed solutions can be deployed quickly. Because there are no on-premise hardware requirements, you can start using the software sooner and gain a competitive edge. In contrast, building an in-house solution can take years, during which you may fall behind competitors who have already adopted modern solutions. 

Second, you also benefit from years of experience in implementing their solution. An AFS implementation boasts a proven track record of successful conversions and deployments, guided by its professional services group using a well-established “playbook.” When you leave implementation to the experts, you are ensured success. 

The rest of the story… 

Now that we’ve debunked most of the myths about why building is better than buying, let’s explore what SaaS offers over in-house solutions. Here are a few features of a system like AFSVision that would be either impossible or exceedingly difficult to manage with an in-house solution.

Continuous Innovation and Updates 

When you choose an out-of-the-box solution provided by a partner dedicated to providing the best in commercial lending servicing platform, you benefit from ongoing innovation and updates. AFS continuously monitors industry trends and incorporates them into the platform’s roadmap. This ensures that your lending solution remains innovative without the need for constant in-house development efforts. 

Focus on Core Business 

By opting for a proven platform like AFSVision, your institution can focus on its core business of lending and customer relationships, rather than getting bogged down in software development. This allows you to allocate resources more effectively and concentrate on strategic initiatives that drive growth and profitability. 

Enhanced Customer Experience 

In today's 24/7 world, customers expect immediacy. AFSVision's real-time, fully mobile and digital platform improves response times to client requests, credit approval decisions, and market fluctuations. This enhanced customer experience can be a key differentiator in retaining existing clients and attracting new ones. 

Data-Driven Decision Making 

AFSVision provides powerful business intelligence tools and dashboards that enable data-driven decision-making. This access to consistent, real-time, reliable data is crucial for adapting to changes in competition, customer preferences, and technology. 

The verdict is in…buy is better than build. 

Don't let outdated myths and beliefs hold you back from transforming your commercial lending operations. With some fact-checking, it’s evident that opting for a SaaS solution over building an in-house platform offers significant benefits for managing, servicing, and growing your commercial lending portfolio. From cost-effectiveness and scalability to integration, innovation, timeliness, customer satisfaction, and data insights, AFSVision provides a comprehensive, flexible, and reliable platform to meet your current and future needs.

Contact us today to find out how AFSVision can help you achieve your goals and find out why AFS is a trusted partner in delivering the gold standard in commercial lending platform for banks of all sizes and segments.