An Awesome Banking Experience Starts at the Core

By Christopher McClinton

In case you missed it, American Bankers Association President and CEO Rob Nichols had quite a lot to say on the topic of core platforms at the ABA Annual Convention back in October. Just the week prior, he sent a personal letter to the CEOs of the largest core providers in which he conveyed that of all the issues brought to his attention by ABA member banks among the most pressing is their concern over the constraints placed upon them by their core providers.

In a respectful and direct manner, he challenged the providers to empower community banks with technology, and importantly, terms of service that are right for this digital age of banking. Increasingly, consumers interact with banks in purely digital channels and those consumers bring sky-high expectations about how those user experiences should be delivered.

It is unrealistic to think that even extremely capably companies like the core processors could be excellent at every channel and product. The consumer experience at Netflix is awesome. The consumer experience at Amazon is awesome. Awesome is the new bar. And banks can meet it—but they need to be empowered by technology that starts at the core and unencumbered by contracts that inhibit choice and agility.

In his remarks, Nichols announced the formation of a banker committee that would work over the course of 2019 to identify concrete actions to pursue. The ABA Core Platforms Committee convened in late December, and it comprises 21 bankers representing institutions ranging from $150 million to $25 billion in assets coast-to-coast. The committee’s first in-person meeting was held in Washington, D.C., on Feb. 5. Its first order of business: to establish consensus as to the primary shared challenges that community banks face in working with their core providers.

Over the course of the year, the committee will engage in constructive dialogue with representatives of the core providers to convey the bankers’ most pressing needs and articulate the principles that the committee believes should be recognized as universally fair, foundational and non-negotiable between banks and their core providers.

Apart from the committee’s work, ABA’s efforts to give the industry a helpful nudge in the direction of modernity also include support for new companies that will challenge the entire industry, including banks and their providers, to think very differently about the way a core platform enables a bank to innovate. In January, at the recommendation of its venture investment committee, the ABA board of directors approved a direct investment in Finxact, a core-as-a-service provider based in Jacksonville, Fla.

Led by Frank Sanchez, Finxact is developing a cloud-native system of record for processing core banking transactions that serves as a platform for rapidly evolving digital banking requirements. With its latest capital raise, Finxact secured $30 million in equity financing from investors that include ABA, Accenture Ventures, SunTrust, Live Oak Bank, Woodforest National Bank, and First Data.

What will the future of core banking look like? I don’t know. But my hope is that it will be cloud-native, consumption-based, and making expansive and responsible use of APIs to interact with a marketplace of solutions that compete on price and quality for the bankers’ business. Such a core begins to look like a “platform” in the sense the word is construed by the likes of Amazon and Android. A platform over which a broad array of financial services whether outsourced or in-sourced by the bank can be created, curated and delivered in a way that’s . . . well, awesome.

Christopher McClinton is SVP for payments and operations at ABA.