Federal Bank’s Strategic Choice to Build Digital Platforms In-house

In its nine-month results for FY26, Federal Bank reported strong numbers across businesses. The bank’s earnings improved without a corresponding rise in costs. Federal Bank’s digital infrastructure has played a key role in supporting this performance. Notably, many of the digital platforms have been conceptualised and built by in-house teams, giving the bank the operational freedom to launch features during peak seasons while reducing dependence on vendors.

Federal Bank has a robust in-house IT and digital team. “For instance, the bank’s UPI switch is built and maintained entirely in-house. A modern digital architecture has been designed in-house that supports both real-time and batch processing across all customer touchpoints,” says Indraneel Ajitkumar Pandit, CDO, Federal Bank. At the same time, for some core systems, such as the core banking system (CBS), the bank uses best-in-class vendor solutions.

“Analytics is a good example of something we do largely in-house. We have a large internal analytics team that drives digital campaigns, customer segmentation, business insights, funnel management, and cross-sell initiatives,” says Pandit.

Benefits from Building In-house

Many of the benefits of building systems in-house don’t show up directly as line-item cost savings. Instead, they accrue in other forms such as reliability, control over intellectual property, flexibility in process design, faster execution, and avoidance of vendor lock-in.

For example, suppose an organisation uses a SaaS-based solution that charges on a per-transaction basis. “That model works well when volumes are low, or when you are a smaller organization that doesn’t want to invest heavily upfront. But as transaction volumes scale, every transaction carries a cost payable to the vendor, and that quickly adds up to a very large amount.

In contrast, when you build infrastructure in-house, you incur the cost upfront, but that cost is amortized over a longer period and across a much larger transaction base. Over time, this often turns out to be significantly more economical. More importantly, it gives you much greater flexibility,” explains Pandit.

For instance, if there is a new regulatory requirement with a tight deadline, the bank doesn't rely on a vendor’s roadmap or availability—changes can be rolled out without any vendor dependency. Similarly, if a business team comes up with a new idea that needs to be digitised quickly, the bank can move much faster internally.

When Partnering with Vendors Makes Sense

However, there are scenarios where adopting partner solutions makes more sense than building in-house. For example, document digitisation may appear to be a simple problem on the surface. “But when you factor in regulatory, legal, and compliance requirements, it becomes quite complex. Could we build it ourselves? Yes. But if there is a partner who has already solved this problem well, it makes sense to adopt their solution and integrate it into our broader ecosystem,” says Pandit.

Similarly, there are areas like UI/UX design, where Federal Bank has strong internal teams, but if a partner is exceptionally good at a specific capability, it makes sense to work with them. While building large platforms—like a mobile banking app—it is often more efficient to use specialized point solutions from partners for specific components, rather than trying to build everything from scratch.

Control Over the Technology Stack

That said, “We always retain control over the overall stack. It’s a synergistic model. If someone does a particular thing better than us and has a strong competitive advantage in that area, there is no reason for us to reinvent the wheel. We focus on what we do best and leverage the expertise of our partners.”

There is also a significant opportunity-cost dimension to not rely on vendors. Take festive seasons in India, when loan volumes spike sharply over a short period. “If we are unable to roll out a process improvement in time because a vendor cannot support us immediately—perhaps because they are servicing multiple clients—we lose business during those critical days. That opportunity loss can be far greater than the cost of building and maintaining systems in-house,” says Pandit.

So while it’s hard to attach a single number to the savings, the combined benefits of faster go-to-market, operational control, scalability, and reduced opportunity loss make in-house development a very strong strategic choice for the bank.

Partnership with Fintechs

Federal Bank is also one of the most preferred banking partners for fintechs. “Some of the earliest fintech companies in India chose us as their first banking partner and have continued with us over the years. We power much of their backend infrastructure,” Pandit says.

That relationship speaks volumes about the robustness and reliability of the infrastructure the bank has built. If the systems go down, it has a direct bearing on the businesses of the bank’s fintech partners. “The fact that they chose us early and have stayed with us for years gives me a lot of confidence that we are doing the right things on the technology front,” says Pandit.