Low-code/no-code (LC/NC) platforms have gained significant attention in the financial sector, with promises of rapid development and reduced dependency on skilled developers. These platforms allow “citizen developers” to create applications with minimal coding, potentially speeding up digital transformation. However, while LC/NC platforms are becoming more popular – with expected revenues of $187 billion by 2030 – they come with several drawbacks that can hinder long-term innovation, particularly in the banking and financial services industry.

As financial institutions evolve, they need solutions that balance flexibility, compliance, and performance. This is where customizable platforms shine, offering a combination of ready-to-use modules with the flexibility to meet specific business needs. These platforms allow financial institutions to create tailored solutions that cater to unique markets, a necessity in an industry where 30% of fintech startups are struggling to stand out.

In this blog, we’ll explore why low-code/no-code platforms might not be the best fit for digital banking and fintech, and how customizable platforms offer a more strategic solution for long-term success.

The Drawbacks of Low-Code/No-Code Platforms in Digital Banking

Limited Customization – A Generic Approach to Unique Needs

Low-code and no-code platforms are designed to serve a broad market, which often results in generic features that don’t address the specific needs of financial institutions. While these platforms work for simple applications or internal tools, banks require solutions that are highly customized to manage complex workflows, engage customers, and meet strict regulatory requirements. Unfortunately, LC/NC platforms lack the depth needed to tailor solutions to a bank’s unique needs, strategic goals, and competitive positioning.

In contrast, customizable platforms offer a range of pre-built modules that can be easily tailored to meet the specific demands of the financial sector. These platforms combine the benefits of custom development with reduced time and cost, providing banks with the flexibility to adapt to diverse customer preferences. In fact, 86% of financial institutions consider personalization crucial to the success of their digital strategies, underscoring the importance of flexible platforms that can scale with customer demands.

Scalability – Simple Solutions Don’t Scale

LC/NC platforms are excellent for small-scale applications and quick deployments, but they struggle to scale as banks grow. What may work for a simple use case often becomes insufficient as a bank expands and its operational demands increase. The simplicity that makes these platforms attractive can quickly turn into a limitation, as they are unable to handle complex workflows, high transaction volumes, and larger customer bases. This results in performance bottlenecks, inefficiencies, and rising operational costs.

On the other hand, customizable platforms are designed with scalability in mind. These platforms can handle high transaction volumes, complex user interactions, and growing customer bases without compromising performance. Their robust architecture allows banks to seamlessly adapt to evolving technologies, regulatory changes, and market demands.

Integration Challenges – Limited API Support

Banks often rely on an array of legacy systems, third-party services, and proprietary software. To function efficiently, new systems must integrate seamlessly with these existing tools. While LC/NC platforms offer API integrations, they are often limited in their scope and may not support deep, complex connections with legacy systems.

Customizable platforms, however, are built with robust API ecosystems that ensure smooth integration with a bank’s existing infrastructure. Given that over 40% of banks still use legacy systems built on outdated technologies, customizable platforms are essential for maintaining interoperability while modernizing core systems. This allows banks to continue leveraging their existing infrastructure while gradually adopting newer technologies.

Compliance – Navigating Complex Regulations

Financial institutions face an ever-growing range of compliance requirements, including data privacy regulations, anti-money laundering (AML), and customer due diligence (CDD) rules. Compliance costs have risen by over 60% since the 2008 financial crisis and are expected to continue increasing.

LC/NC platforms typically offer basic compliance features, but they often lack the granular control needed to navigate the complex regulatory landscape across different regions. This can expose banks to significant risks. Customizable platforms, however, are designed with compliance at their core, providing the flexibility to meet specific regulatory requirements. This allows financial institutions to comply with evolving regulations without sacrificing flexibility or operational efficiency.

Performance – More Than Just Meeting the Minimum

While LC/NC platforms are designed for ease of use, they often compromise on performance, particularly when dealing with high transaction volumes or complex banking operations. This can lead to slowdowns, frustrating customers and eroding trust. Performance issues can also harm a bank’s ability to build strong, emotional connections with customers, which is crucial for loyalty.

Customizable platforms are built for high performance, ensuring reliable service even during peak usage. With the ability to fine-tune the platform to a bank’s specific needs, these solutions provide consistent, high-quality service that meets the demands of both customers and the business.

Vendor Lock-In – The Hidden Cost of Proprietary Systems

A major drawback of many LC/NC platforms is their proprietary nature, which creates vendor lock-in. This dependency on a single vendor can limit a bank’s ability to form strategic partnerships with other service providers, hindering innovation and growth. Moreover, vendor lock-in increases operational costs due to the ongoing need for platform upgrades, maintenance, and customizations.

Customizable platforms are built to be vendor-agnostic, allowing banks to integrate seamlessly with a wide range of third-party services. The use of open APIs and modular architecture ensures that banks can innovate without being tied to a single vendor, giving them the flexibility to adapt to new technologies and market opportunities.

Advanced Features – Meeting Industry Demands

Banks and fintechs require advanced features, such as AI-driven analytics, fraud detection, and automated underwriting processes. While LC/NC platforms may support basic functionalities, they often lack the depth to handle more sophisticated requirements. This puts banks at a competitive disadvantage in an industry that demands real-time, data-driven decision-making.

Customizable platforms offer pre-built modules designed to meet complex industry needs. These solutions allow banks to integrate advanced features without compromising performance, compliance, or user experience, ensuring they remain competitive in an evolving market.

The Dangers of Citizen Developers – Inconsistent Standards

While the idea of empowering “citizen developers” is appealing, it comes with risks. Non-expert developers may lack the necessary skills to ensure high standards of security, data management, and application robustness. This can lead to inconsistent coding practices and potential vulnerabilities, particularly in the highly regulated banking sector.

Customizable platforms are developed by professional teams with extensive experience in financial technology. These teams ensure that platforms adhere to industry best practices, security protocols, and compliance standards, providing banks with the confidence that their systems are secure and efficient.

Adoption and Training – A Steeper Learning Curve

Although LC/NC platforms are marketed as easy to use, they still come with a learning curve. Employees must familiarize themselves with the platform’s specific logic and workflows, which may not align with the bank’s existing processes. This misalignment can hinder user adoption, which is a leading cause of failure in digital transformation efforts.

Customizable platforms are designed to integrate smoothly with a bank’s existing systems and workflows. While some training is required, these platforms align with the bank’s operations, resulting in higher adoption rates and greater long-term efficiency.

The Future: Customizable Platforms for Long-Term Success

While low-code/no-code platforms may offer a quick solution for simple applications, they fall short in addressing the complex needs of digital banking. Customizable platforms, on the other hand, provide banks with the flexibility, scalability, and advanced features needed to thrive in a rapidly evolving market.

By combining pre-built solutions with the ability to tailor them to specific needs, customizable platforms empower banks to innovate, optimize costs, and deliver exceptional customer experiences. These platforms ensure that banks can meet regulatory requirements, integrate with legacy systems, and scale with growing demands, all while maintaining performance and security.

For digital banking success, the choice is clear: embrace customizable platforms that prioritize flexibility, performance, and compliance to build a sustainable, future-proof strategy.