From Merely a Vendor to a Real Partner
Rethinking Technology Partnerships: Can Banks Turn Their Technology Relationships into a Strategic Advantage?
What if the way a bank acquires digital solutions is becoming a competitive disadvantage? A digital solution is rarely bought and forgotten.
It is integrated, secured, serviced, upgraded and continuously evolved.
Lifecycle management therefore consumes management attention across business, technology, finance and risk.
The question is whether banks need a different way to engage technology providers—one that does not require a new commercial cycle for every enhancement or evolution.
Why It Matters
A bank’s digital capability is no longer a single core banking system. It spans core banking, channels, payments, onboarding, CRM, APIs, risk and compliance, data, analytics, security and increasingly AI-enabled functions.
Each capability has its own evolution cycle, yet all require continuing investment and management.
The American Bankers Association’s 2025 Core Platforms Survey found that 35% of respondents were dissatisfied with their core provider, even though 69% said they were likely to renew.
The Federal Reserve Bank of Kansas City has also identified provider performance, support, integration, contracts, switching costs and fees for changes and upgrades as important considerations in modernization decisions.
The relationship with a technology provider is therefore a strategic issue, not simply a procurement decision.
Where Does the Friction Come From?
A bank may renew a major platform, but it cannot acquire a new system every time it needs an enhancement.
Yet each change can trigger a familiar cycle: requirement definition, analysis, quotation or RFP, negotiation, approval, work order, development, testing and deployment. Each step has a legitimate governance purpose. The problem is the cumulative effect.
A documented experience involving a major Bangladeshi financial institution illustrates this challenge.
Formal correspondence showed that obtaining approval for CBS and application changes could take several months before work began.
Governance was necessary, but the process could also reduce responsiveness to business and regulatory needs. There is another tension: value for money.
For a unique enhancement, the bank may have no direct comparator and must ensure it is not overpaying, while the provider must be fairly compensated for specialist expertise and investment.
Both sides can therefore feel disadvantaged. The bank may feel it is paying too much and receiving too little flexibility; the provider may feel it is not adequately compensated and that approvals are too slow. Both perceptions can be valid.
The deeper problem may be the structure of the relationship itself. Procurement remains essential for accountability, transparency and risk control, but it should not necessarily define every interaction with a provider whose technology is critical to the bank’s long-term competitiveness.
The Bigger Question: Can Success Be Shared?
If the problem is structural, what alternative exists to a purely transactional acquisition model? One possibility is a shared-value, shared-success relationship in which the bank’s success and the provider’s success are deliberately aligned.
The provider continues investing in the solution for the bank’s long-term benefit, while the bank invests in a relationship that gives the provider confidence to make that investment.
This becomes a joint product-development cycle.
The bank contributes knowledge of its business, customers and regulatory environment; the technology provider contributes architecture, engineering and product innovation. Instead of treating every enhancement as an isolated purchase, both parties can establish a framework for continuous evolution, with agreed priorities, service expectations, investment commitments and measurable outcomes.
The broader technology market is already exploring outcome-based approaches. Deloitte has highlighted shared risk and reward, transparency and outcome measurement in outcome-based pricing.
Other technology companies and industry analysts are also exploring pricing linked to customer outcomes rather than traditional licences or seats.
These examples are not necessarily core banking models, but they demonstrate that the economics of technology relationships are changing.
For banking technology, several mechanisms could be considered, depending on the solution and the bank’s risk appetite: predictable life cycle economics with transparent costs and responsibilities; customer- or usage-based recurring fees; agreed continuous investment in innovation; and, where measurable and appropriate, incentives linked to outcomes, revenues or profits attributable to the technology.
These mechanisms need not be used separately. A combination can create a more flexible and enduring commercial relationship.
The objective is not to abandon governance or procurement discipline. It is to move beyond a one-size-fits-all transactional model towards a relationship that reflects the value, risk and long-term responsibilities of both parties.
In such a model, commercial arrangements can become a mechanism for encouraging innovation rather than an obstacle to it.
What Difference Would It Make?
Such a model will not be appropriate for every technology. A mobile platform may require continuous engagement, while a stable subsystem may remain suitable for periodic change orders.
A core banking system, given its criticality, complexity and replacement cost, may justify a long-term strategic relationship.
For the bank, the objective should not simply be lower technology cost. It should be greater competitiveness: faster time to production, quicker regulatory response, faster product innovation, less management time spent on repeated procurement processes and stronger strategic capabilities.
The bank should be able to focus more of its energy on serving customers and responding to the market, rather than repeatedly renegotiating the mechanics of technology evolution.
For the provider, the model creates an opportunity to balance ongoing investment in cloud, security, resilience, engineering, maintenance, testing, architecture, compliance, product management, R&D, data and AI with predictable and sustainable revenue.
The relationship can become profitable and enduring while reducing dependence on individual change orders.
In return, the provider must demonstrate that it is continuously delivering value, maintaining quality and investing in the bank’s future needs.
Of course, such an arrangement requires careful structuring. Service levels, security, data ownership, attribution of revenues or outcomes, accountability, investment commitments and exit provisions must all be clearly defined.
Performance metrics should be agreed in advance, and both parties should retain appropriate safeguards.
Shared success does not mean reduced accountability; it means aligning accountability with shared objectives.
The Strategic Question
The strategic question for a bank is no longer simply, “Which software should we buy?” It is: “Which technology relationship will allow us to remain competitive over the next 10–15 years?” The issue is not merely technology cost.
It is how effectively a bank can leverage technology to meet business and regulatory needs today while continuously preparing for tomorrow.
This proposition applies equally to Islamic and conventional financial institutions. The commercial rationale is universal: technology relationships can align incentives, investment, responsibility and reward more effectively.
Islamic finance adds an important perspective through its emphasis on partnership, fairness, transparency, shared responsibility and mutual benefit. Research on Islamic-bank servitization has also explored long-term relational approaches and value co-creation.
This does not mean that every technology partnership should automatically be structured as Mudarabah or Musharakah. Any such application would require detailed Shariah, legal, accounting, tax and regulatory review.
The broader principle is more important: technology partnerships can evolve beyond conventional transactions towards relationships in which both parties have a sustained interest in each other’s success.
Banks should therefore begin asking a broader question when they next evaluate a major technology investment: are we simply buying a system, or are we building a capability and a relationship that can evolve with us?
The answer may determine not only the efficiency of today’s technology spending, but the competitiveness of the institution for years to come.
In the digital era, competitive advantage may ultimately belong not to the bank that buys technology best, but to the bank that builds the ecosystem around technology best.
(The writer: CEO & Co-Founder, Millennium Information Solution Ltd. (MISL), BSEE, MBA)
