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Possible application of agile and waterfall methodologies in the management of financial institution projects


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The question often arises, what the fundamental differences between the most commonly used project management methodologies, the agile and waterfall models are.

In our post, we review these approaches and examine the possibility of their parallel application during banking projects.


Our company, MINDSPIRE Consulting, specializes in banking transformation, therefore for decades our employees have experienced first-hand that project management permeates the everyday life of the financial sector and is an integral part of the operation of financial institutions, since when we want to create a banking product or service, we start a project for it.

We always operate projects based on some kind of methodology, of which the two most commonly used approaches nowadays are the waterfall model, where we proceed step by step in a predetermined order, and the agile methodology, where we move towards the delivery of the project by fulfilling goals set for a short period of time.

Let’s see what the most outstanding features of these two models are, how the elements of the models mix with each other in practice, and which of their features are worth combining.

Adam Schlichter

Ádám Schlichter


Ádám has been working in the financial sector for more than 5 years, during which he has recently gained experience in international bank integration and large-scale system replacement projects.

His tasks are related to the support of the project management office, along the lines of effective task management, the application of strategic thinking, and ensuring transparent operation.

Waterfall-based project management model

The waterfall-based approach to project management is a traditional development methodology that breaks down the delivery process into several separate phases and processes, which are built on each other sequentially. These main project stages are initiation, analysis, detailed design, implementation, testing, live deployment, and finally closure. Basically, each phase is executed once, and they follow in order depending on the fulfilment of the antecedents.

It is important that in the waterfall-based model, the project manager has an indispensable role, whose task is to facilitate the work of the project team, is responsible for the successful completion of the phases, i.e. the delivery of the project (Source: PMI).

One of the basics of the waterfall model is that the entire project is defined and planned in advance, the budget, the project team, the business and IT requirements and goals, the stakeholders to be involved, the roles and responsibilities, and of course the exact deliverables, i.e. the project’s scope. Potential risks are identified for the first time even before the start of the project, and a communication strategy is developed for the project for later application. Since the operational-level breakdown of the milestones defined in the project is also completed during planning, we must be careful and thorough, otherwise we will face serious risks later on.

In the waterfall-based project management model the project manager during the execution has to lead the project towards successful delivery by following the methodology, taking into account the elements of the project management triangle – the project scope, the relationship between the incurred costs and the remaining time –, and of course always keeping in mind the fulfilment of quality requirements. The interesting thing about the triangle is that none of its variables can be changed without affecting the other two. During the project, the elements must be kept in balance in order to ensure that the predefined scope is delivered according to the plans.

During the execution, the product is delivered, which is tested and improved until acceptable quality can be demonstrated. In this stage, changes affecting the elements of the triangle occur, which must be handled by the project manager according to the principles and strategies defined during planning.

In the waterfall-based project management model, during testing, following the testing plan, the test strategy, the scope of testing, and the necessary testing resources are defined. To conduct testing, it is necessary to define test cases, which are usually defined based on the functional and non-functional requirements. During testing, the errors are listed and prioritized, which are corrected according to this order.

During live deployment, the product moves from the test environment to the production environment, and from there it can support the service for which the project was started. Going live with a system is typically a resource-intensive task, with the main milestones typically being the definition of related training, the creation of the IT infrastructure, and the planning of go live steps (data migration, configuration, installation). After going live, the operation of the system is closely monitored, so that possible errors and deficiencies can be corrected immediately.

After the developed product goes live with the predefined operation strategy, the project can be closed. This is when the completed documentation is finalized, lessons learned can be defined, and then the project team is disbanded.

It is important to emphasize that within the framework of the waterfall model, one can only move on from one phase to another if the previous phase has been closed. The delivered product will go live at the end of the project, together with all the completed functions.

It can be stated that waterfall-based project management is model-driven, the number of materials produced during projects is significant and therefore resource-intensive, as well as inflexible in the face of on-the-fly changes. In the waterfall model, the role of the project manager is indispensable and in many cases a project office is also needed, which supports, supervises, and manages the work of the project under the leadership of the project manager.

The agile project management model

Unlike the waterfall methodology, the role of the project manager cannot be interpreted in the agile model, and thorough planning covering the entire life cycle of the project does not take place either, the delivery is interwoven with rolling planning and continuous change management. The basis of the agile project management model is that the developments must always meet the ever-changing, current customer requirements, and not the goal of reaching distant milestones defined at the beginning of the project, so it is an excellent solution for supporting continuous developments and go live activities.

In agile projects, delivery is done iteratively, the advantage of which is that it facilitates the start of the next project phase. In contrast to the waterfall model, it is not necessary to convene the stakeholders or prepare a detailed summary report at the end of the phase.

Agile execution is divided into short stages, the so-called sprints (according to the Scrum methodology), which repeat themselves at specific time intervals (2-4 weeks) containing the same elements. In the agile model, the project management triangle moves to the background slightly, because here the focus is on the usability of the product and user satisfaction, rather than the scope-deadline-cost balance or the fulfilment of pre-set plans.

Possible application of agile and waterfall methodologies illustration

The main differences between agile and waterfall methodologies

The structure of the two models differs in that, while the waterfall methodology plans for the long, the agile on the other hand for the short term. As a result, the agile approach is much more flexible, so it is easier to handle changing requirements, however, in the waterfall model, a serious change management process must be built in the planning phase if we want to make the implementation more flexible.

The waterfall model relies heavily on detailed documentation at each stage, whereas in agile projects the documentation is constantly changing along with the product. In many cases, the projects put a lot of emphasis on operational or management reporting processes. In order to be able to produce the documentation on time and with adequate quality, it is often not enough to have a project manager, but also the previously mentioned project office might be needed to set up.

Due to the detailed planning the waterfall model compared to the agile model operates with much stricter and more accurate time- and cost management, so any scope change can result in serious cost overruns.

In terms of organizational structure, cross-functional teams work together in agile projects, which, depending on the work phase or workload, can easily and quickly cooperate and concentrate on completing tasks. In contrast, in the waterfall model, different teams deal with individual phases.

One of the great advantages of agility is the continuous delivery of business values, whereas the waterfall model only delivers the final product for use when the project is closed.

Why is it not easy to operate in a purely agile manner during the execution of financial institution projects?

Nowadays, the agile operating model is very popular, many projects are attempted to be executed according completely to it. However, experience shows that in many cases projects run into obstacles and, for some reason, lack success.

Companies with a diversified organizational structure and a larger number of employees usually operate in a functional manner. For an organization to successfully execute purely agile projects, managers and employees must be committed to the model.

Generally speaking, financial institutions are large organizations where a significant part of the IT architecture does not meet the requirements of the modern age, because developments and releases cannot be handled flexibly. It follows from the old IT systems and their associated organizational structure that purely agile teams cannot be built, as it is not possible to allocate resources according to the agile framework. On the other hand, in the case of a waterfall project, it is easier to involve experts by planning in advance, or by obtaining a supportive decision from the governing body of the organization.

Although there is no need for a project manager in agile projects, due to the organizational operation of banks, very often it is not possible to avoid the use of the role, for example due to the numerous tasks associated with maintaining contact with external and internal project members, preparing the necessary documents, or executing other professional coordination tasks.

Today, it is popular and common for agile project management tools to be also used in projects operating traditionally, along with the standard support solutions (Microsoft Project, Microsoft Word, etc.). The use of Confluence or JIRA, as well as the introduction of elements of an agile meeting culture (convening of daily or weekly stand-up meetings) can make documentation more structured and facilitate everyday collaboration. Therefore, in order to support the better understanding and flow of information, it is worth including agile elements in the project.

The main conclusions related to the application possibilities of agile and waterfall methodologies

One of the cornerstones of choosing the right software development methodology is the quality of the project’s requirements. In the case of projects where consumer trends and expectations change rapidly, and the importance of compliance is paramount, it is worthwhile to create business value in an agile model. On the other hand, if we are starting a well-planned project, for example where we are preparing to implement an off-the-shelf product, it may be easier to choose the traditional waterfall or hybrid methodology.

Another important aspect may depend on organizational issues. One of the most important aspects of this is the size of the project and the role of the project manager. In the case of a large project, where dozens of suppliers delegate experts to the project organization, external (and of course internal) communication, procurement-related tasks, preparation of documentation, or financial planning require a whole person, a project manager. On the other hand, if the project requires no other than development teams to deliver the requirements, and there is no need to perform additional tasks, then agile operation may be the better solution.

Do you have a question about banking project management or PMO? Contact our experts now!

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