Accelerating the Pace of Change

By Monica C. Meinert

It’s often said that banks were the original fintech innovators. From the creation of the ATM to remote deposit capture, banks have a long history of finding creative solutions to meet the ever-changing needs of their customers.

It’s no different today—banks continue to embody that innovative spirit. What is changing, though, is the pace of everything. Customer expectations are evolving faster than ever before, new players are emerging every day and the power of technology continues to increase at an exponential rate.

“The market is moving at an ever-faster clip,” says Mike Dionne, managing director for community markets at Finastra, which the American Bankers Association endorses for its loan origination system and online mortgage application technology. “We’ve seen disruptors coming in from the outside and eating away at what used to be the domain of the financial institution.”

The experience that consumers expect is being driven by the Amazons, Ubers, Googles and Facebooks of the world, and at a time when competition is already fierce, banks need winning digital strategies now more than ever.

The future is open

There’s broad consensus among core providers that the future of banking calls for an open architecture.

“We can’t anticipate every direction that the financial services space may go,” Dionne acknowledges. That’s why core providers are embracing the idea of “opening up our core capabilities to APIs and allowing the financial institutions themselves to come in and develop capabilities that meet a particular need, or to experiment with fintechs who may have an innovative idea.”

Finastra facilitates this open experience through its FusionFabric.cloud platform-as-a-service solution. Through the platform, banks can access development tools, a production environment through which they can deploy and run new applications and a marketplace where apps can be bought or sold. “It’s a place to go play and experiment, using your data, using the current capabilities that you have to see: does this solve a particular use case?” Dionne says.

At FIS, Rob Lee, EVP of digital and banking solutions, says that his experience working with fintech firms through the organization’s fintech accelerator program (which is now entering its fourth year) underscored the need to develop an easy way to facilitate partnerships between banks and fintech players. Out of that idea, FIS built and launched Code Connect, its API gateway that was recently recognized by industry research firm Aite Group. Code Connect today offers access to thousands of APIs that both FIS core customers and non-customers can leverage, Lee says.

“Openness is the future of core banking,” adds David McIninch, SVP of strategy and marketing for bank solutions at Fiserv. “Every core provider and core system needs to embrace this idea.” For Fiserv, that means investing in API-enabled systems to facilitate more seamless integrations, which it does through its Enterprise Services Framework and Communicator Advantage tool—which is specifically designed to facilitate partnerships with third party fintech providers.

“What our community banks are looking for with respect to openness . . . is the ability to control how their data flows from point A to point B,” he says, adding that the core provider—which was also recently recognized by Aite Group—is focused on “making sure we can be an enabler of that data flow and an enabler of all the value creation that goes with it.”

Reengineering the digital experience

With an open architecture and APIs at their fingertips, banks can pursue the holy grail: reimagining a digital experience for their customers that will set them apart in the marketplace.

“It’s not just about instant gratification now,” adds Emily Steele, president of Temenos North America. “It’s about knowing me as a consumer, serving up the information and continuously learning my behaviors. All of those things are quite dependent on a real-time, open infrastructure.”

To help its customers revolutionize the customer experience, Temenos recently launched Temenos Infinity—a new omnichannel solution that brings together acquisition and onboarding, product origination, customer retention tools and more. “It allows you to build those consumer experiences and get your products to market [and]make sure you’re in touch with your customers’ needs,” Steele says. She adds that the Infinity solution can sit on top of any existing core, and that banks have considerable flexibility in terms of how they use it.

For community banks especially, getting the digital strategy right can make a crucial difference in customer satisfaction and retention. It’s the difference, for example, between a young customer choosing to stay with the community bank they grew up with when they go off to college in a different state or moving to a larger competitor.

As Stacey Zengel, VP at Jack Henry and Associates, observes, community banks “want to break down the walls of the bank and push [it]out to the consumer via the digital presence.” Jack Henry bank customers use the firm’s Banno solution for this. Since acquiring Banno in 2014, “we’ve turned them into an omnichannel solution that’s really banking anywhere,” Zengel says. That includes online account opening—recently, Jack Henry acquired BoltsOpen, a digital account opening solution designed to reduce the time burden involved with online account opening. The solution—now branded JHA OpenAnywhere—is also built into the Banno interface.

Zengel likens it to the Amazon “instant-click” shopping experience. “We want banking to be that way, too,” he says. “Instead of spending an hour opening an account, you can do so in five minutes or less on your phone or on your tablet.”

In addition to digital account opening capabilities, Banno also offers a chat feature that allows customers to have highly secure, real-time conversations with their banker and share account details and other information. By incorporating solutions like these, banks can appeal to younger, social media-savvy generations while maintaining that high-touch, personalized customer service that sets them apart from their larger competitors, Zengel says.

Another way to deliver that high-touch, always-on experience is by giving consumers the power to make real-time decisions about their accounts. “Especially as it relates to digital banking, the ability to deliver real-time alerts and real-time notifications around changes either on the client side or on the bank side is incredibly important to drive engagement between the bank and the customer,” notes Fiserv’s McIninch. “We want to be able to service the needs of the client in a real-time environment and be able to do it with a very attractive, seamless, quick user experience.”

Fiserv offers its bank clients a solution called Notifi, through which customers can choose which types of alerts they’d like to receive, and how they receive them—whether through email, text or push notification.

From the bank’s perspective, having a real-time alert system can help reduce fraud-related costs, decrease servicing costs, while ultimately helping engage and retain the customer.

Living in the cloud

As the conversation around the future of banking continues, cloud technology will also continue to play a central role. Banks are already seeing the benefits, and many have begun migrating various services over to the cloud.

One of the biggest advantages of the cloud is that it allows banks to “mitigat[e]some risk, decreas[e]cost and free [their]resources to focus on banking,” notes Emily Steele. It also provides right-sized capacity, and quick scalability. Temenos expects the next generation of banking to be “cloud native and cloud agnostic,” she adds; in other words, capable of being deployed on any cloud platform—public or private—and across multiple clouds at once, which can ultimately help reduce risk.

Recognizing the importance of cloud technology, ABA has made direct investments in two fintech firms. Summit Technology Group helps financial institutions transition to the cloud, while Finxact offers a cloud-based open-core banking platform. Finxact’s “core as a service” platform allows banks to nimbly add new customer experiences and services to their core banking operations.

“Our goal is to provide banks of all sizes a modern core banking platform that is functionally robust, reliable, scalable and highly efficient,” says Finxact founder and industry veteran Frank Sanchez.

Direct banks rising

Among the many competitive forces challenging community banks for market share today are direct banks—branchless institutions that often attract technologically savvy consumers with sleek mobile offerings and attractive interest rates.

“Over the past 18 months, we’re hearing more and more from community banks that they need to deliver direct banking capabilities to compete with the array of direct banks in the market today,” FIS’ Rob Lee says. In response, the company in early 2019 announced FIS Core on Demand to help its community bank clients compete with internet banks that have been taking the retail banking market by storm in recent months. Core on Demand provides banks everything they need to quickly launch a direct bank in as little as 90 days.

 

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About Author

Monica C. Meinert

Monica C. Meinert is deputy editor of the ABA Banking Journal and editorial director at the American Bankers Association, where she oversees ABA Daily Newsbytes.