What APIs Can Do For Your Bank

WASHINGTON, DC — In 2017, Bank Director magazine featured a story titled “The API Effect.” It showed how banks could earn revenue by using application programming interfaces, or APIs. It considered the pros (and cons) of banks turning themselves into technology platforms. And it concluded with a prediction:

APIs will be so prevalent in five years that banks who are not leveraging them will be similar to banks that don’t offer a mobile banking application.

Less than three years later, the banking industry is on a fast track to proving that hypothesis.

Let’s start with the basics. An application program interface, or API, controls interactions between software and systems. As the American Banker recently shared, “APIs are the glue of the internet and allow digital businesses to interact seamlessly. Banks create a digital-first business model by offering services, such as treasury or loan origination, through APIs in an open-banking system.”

So to help bank executives better understand the promise and potential of APIs, our team developed a special FinXTech Intelligence Report. In it, we explore use cases with a focus on banking, and detail the forces driving adoption of the technology among financial institutions of all sizes.

Divided into five parts, we explore:

— Market trends driving the adoption of APIs;
— Actionable API use cases for growing revenue and creating efficiencies;
— An in-depth case study of TAB Bank, which reimagined its data infrastructure with APIs;
— Key considerations for leadership teams developing an API strategy; and
— A map of the API provider landscape, highlighting the leading companies enabling API transformation.

Kudos to the talented Amber Buker for spearheading this effort. As she makes clear, there are several ways for banks to implement APIs. Some will work with their cores (e.g. FIS, Fiserv and Jack Henry) to access the necessary connectivity. Ready-made APIs from fintech providers can quickly address the most common connectivity requirements.

For more complex use cases — like large banks running on old mainframes — the line from systems of record to end users could be longer, with several providers along the path. Regardless of where you are on your journey, understanding the landscape of API providers helps banks get a firmer grasp on the technology and start conceptualizing the scale and design of their potential API project.

To learn more about how banks use APIs, I invited you to download, for free, our FinXTech Intelligence Report, APIs: New Opportunities for Revenue and Efficiency

Who is the Next nCino?

WASHINGTON, DC — With this week’s news that nCino is readying itself for an IPO, I thought to postulate about who “the next nCino” might be in the fintech space. By this, I mean the tech company about whom bank executives cite as doing right by traditional institutions.

For context, nCino developed a cloud-based operating system for financial institutions. The company’s technology enables both customers and financial institutions to work on a single platform that’s optimized for both retail and commercial accounts. In simple terms, they provide everything from retail and commercial account opening to portfolio management for all of a bank’s loans.

In its IPO filing, the company says it works with more than 1,100 financial institutions globally — whose assets range in size from $30 million to $2 trillion. Personally, I remember their start and been impressed with their growth. Indeed, I’ve known about nCino since its early Live Oak Bank days. I’ve gotten to know many on their executive team, and just last Fall shared a stage with their talented CEO, Pierre Naudé, at our annual Experience FinXTech conference in Chicago.

Al Dominick, CEO of Bank Director + FinXTech, Frank Sorrentino, Chairman & CEO of ConnectOne Bank and Pierre Naude, CEO of nCino at 2019’s Experience FinXTech Conference in Chicago, IL.

So as I think about who might become “the next” nCino in bankers’ minds across the United States, I begin by thinking about those offering solutions geared to a bank’s interest in Security, leveraging Data + Analytics, making better Lending decisions, getting smarter with Payments, enhancing Digital Banking, streamlining Compliance and/or improving the Customer Experience. Given their existing roster of bank clients, I believe the “next nCino” might be one of these five fintechs:

While I have spent time with the leadership teams from each of these companies, my sense that they might be “next” reflects more than personal insight. Indeed, our FinXTech Connect platform sheds light on each company’s work in support of traditional banks.

For instance, personal financial management (PFM) tools are often thought of as a nice perk for bank customers, designed to improve their experience and meet their service expectations. But when a PFM is built with data analytics backing it, what was seen as a perk can be transformed into a true solution — one that’s more useful for customers while producing revenue-generating insights for the bank. The money management dashboard built by Utah-based MX Technologies does just that.

Spun out of Eastern Bank in 2017 (itself preparing for an IPO), Boston-based Numerated designed its offering to digitize a bank’s credit policy, automate the data-gathering process and provide marketing and sales tools that help bank clients acquire new small business loans. Unlike many alternative lenders that use a “black box” for credit underwriting, Numerated has an explainable credit box, so its client banks understand the rules behind it.

Providing insight is something that Autobooks helps small business with. As a white-label product that banks can offer to their small-business customers, Autobooks helps to manage business’s accounting, bill pay and invoicing from within the institution’s existing online banking system. Doing so removes the need for small businesses to reconcile their financial records and replaces traditional accounting systems such as Quickbooks.

The New York-based MANTL developed an account opening tool that comes with a core integration solution banks can use to implement this and other third- party products. MANTL allows a bank to keep its existing core infrastructure in place while offering customers a seamless user experience. It also drives efficiency & automation in the back-office.

Finally, Apiture’s digital banking platform includes features such as digital account opening, personal financial management, cash flow management for businesses and payments services. What makes Apiture’s business model different from most, though, is that each of those features can also be unbundled from the platform and sold as individual modules that can be used to upgrade any of the bank’s existing systems.

Of course, these are but five of hundreds of technology companies with proven track records of working with financial institutions. Figuring out what a bank needs — and who might support them in a business sense — is not a popularity contest. But I’m keen to see how banks continue to engage with these five companies in the months to come.

Banks, Make Your Move Into the Cloud

Quickly:

  • To deliver a truly end-to-end digital customer experience, banks need to figure out how and when to move into the cloud.

PHOENIX — As we kicked off this year’s FinXTech Summit, I found myself engaged in a conversation about how (and why) banks might “freeze and wrap” their data using their current core system while moving their customer engagement and analytics into the cloud.  While this was my first time hearing that particular description/approach, the underlying logic certainly applies for many of the bankers joining us at the Phoenician.  In fact, it inspired this short video shot during today’s lunch.

As a company, we’ve been writing about banks realizing that the benefits of cloud computing outweigh added security risks for a while now.  But it strikes me that interest in cloud-based platforms has been on the rise of late.  As our friends at Blend shared on BankDirector.com, “the cloud presents opportunities for enhanced efficiencies and flexibility — without any security trade-offs — so it’s no surprise that we’re seeing more organizations shift to the software as a service (SaaS) model.”

Interested to see what a move into the cloud might means for banks?  Take a look at these five cloud-based companies:

  • nCino – expediting loans and workflow on top of force.com;
  • Apiture – an API-banking joint venture between Live Oak and First Data;
  • Payrailz – an API-based payments platform “check-free killer;”
  • Defense Storm – where Big Data meets Cyber for banks; and
  • Greenlight – offering debit cards for kids.

I’ll check in later tonight to recap several presentations that explore what makes for a strong, digitally-solid bank.  Before that posts, I invite you to follow the conference conversations via our social channels.  You can follow me @AlDominick on Twitter — and our team shares ideas and information through @BankDirector plus our @Fin_X_Tech platform. Finally, search & follow #FinXTech18 to see what’s being shared with (and by) our attendees.

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FWIW, my reference to Amazon.com, Salesforce.com and Oracle in this video traces back to January 2, when Bloomberg reported the first two were “actively working to replace Oracle software running on crucial business systems with lower cost open-source database software.”  For more: Amazon, Salesforce Shifting Business Away From Oracle: Report

Three Strategic Issues Shaping Financial Services

By Al Dominick, CEO of DirectorCorps (parent co. to Bank Director & FinXTech) | @aldominick

Quickly:

  • Banks need to think beyond the notion that they can either build a technology solution or buy it — for inspiration, take a look at how Silicon Valley Bank uses APIs to tap into technology from third party providers.
  • Thanks to products like Amazon’s Alexa, financial institutions must now prepare for “hands-free banking.”
  • Various startups are using behavioral economics to nudge people towards making better financial choices for saving & investing.

_ _ _

If you have been to any of our conferences, you’ve probably heard me (and others) encourage participants to get up & out from their offices to see what’s happening with their customers, potential partners and competition.  I do my best to practice what is preached — and have recent trips to San Francisco, New York City and Austin to prove it.  As I re-read hand written notes, dog-eared white papers and highlighted sections of annual reports, I realize just how much time I’ve spent talking about technology-driven trends shaping the financial industry.  To me, three of the bigger issues being discussed right now involve:

  1. The push for retail customers, which may already be spurring dealmaking.
  2. How customers experience and interact with their bank — which broadly ties into the question should an institution buy, partner or mimic a fintech; and
  3. Given all the hype surrounding machine learning and advanced decision modeling, leadership teams want to know how to augment a bank’s revenues & relationships with such technologies.

To these three trends, both our editor-in-chief, Jack Milligan, and I agree that most bankers understand the imperative to innovate around key aspects of their business, whether it’s payments, mobile in all its many permutations, lending, new account onboarding or data.

Personally, when it comes to knowing one’s customer (and potential customer), I find any good experience starts with great data.  As Carl Ryden, the CEO and Co-Founder at PrecisionLender, made clear at their recent Bank of Purpose conference, “if you hold your data close to the vest and you don’t do anything with it, it’s not an asset. It’s a liability.”

So with that in mind, let me close by sharing a link to our newest issue of Bank Director magazine.  This is our “Great Ideas” issue, one in which we highlight companies like USAA who crowdsource upwards of 10,000 ideas per year for products and new technology.  At a time when banks of all sizes are starting to take advantage of platform-based services, this new digital issue is one that I am really proud to share.