January 25, 2023

Is Your Financial Institution Paying Twice to Access the Data It Already Owns?

by David Wexler in Banking Core Integration , Digital Transformation , Fintech , IT Management 0 comments

Although financial institutions (FIs) already know they must modernize infrastructure to survive and compete, many resist launching transformation initiatives. Fear of the new and unknown is a primary reason that FI decision-makers find themselves stuck in “traditional” methods. Financial technology and open source can be scary concepts until you thoroughly understand them. An API-led, open banking model is a significant departure from how banks and credit unions have operated historically. Many of our customers find it challenging to inform decision-makers, such as the CEO and board members, about a transformational initiative’s ROI (faster delivery of business outcomes, increased operational efficiency, and cost savings) because they must first educate them about the technology itself. This blog will share how we demystify modern financial services integration for our customers and help them build the business justification they need to innovate faster.

Is your FI ignoring this 30-year-old best practice?

In reality, many modern integration architecture practices that FIs want to implement are not new concepts. Integration principles that protect FIs from vendor dependencies have existed in the industry for 30 years. Unfortunately, the financial services industry has simply ignored best practices, such as decoupling connections between systems and implementing connectivity with reusable services. 

You can hardly blame FIs for being cautious, considering the array of modernization solutions vendors offer. Banking core vendors, for example, provide “middleware” solutions that are proprietary interfaces to the financial institution’s data. Fintechs promote “Open APIs” developed with a more modern approach (REST over HTTP) but with benefits that only apply to integrating that one vendor. For this reason, you should thoroughly evaluate the real cost and advantages within the context of a larger strategy.

Are you paying twice for your customer data?

Consider this scenario: a potential vendor promises to provide built-in integration with your core. In most cases, they will charge you via their software license, services, or both for a connection they likely built on custom code. They maintain control over access to data through their approach to building and licensing the integration.

Additionally, every core vendor charges for this kind of connection through a click charge built-in to their contract. FIs are caught between paying the vendor, the core, or both. In either case, the vendor restricts access to the data and charges FIs for a connection that hobbles them more than it helps. 

Unfettered access to data provides FIs with the fundamental building blocks for innovation and modernization. We designed PortX to solve complex financial services connectivity issues cost-effectively. PortX provides FIs full access and control over system integrations and the data that flows between them, eliminating vendor dependencies.

The business justification you need to implement a modern integration approach

It is difficult for FIs to deliver on strategic initiatives unless the software they pay for is open and accessible. The integration should provide unconditional access to the data regardless of who implements the solution. Ownership and control of the data enable your organization to:

  • Manage integrations independently. Your organization should never be in a position where it’s dependent on one system to change out another.
  • Add functions or features quickly. Create the ability to add or change your connections in response to market demand.
  • Enable platform observability. Your FI needs to know if something goes wrong in real time without involving your vendor. That knowledge not only provides peace of mind but also aids the FI in maintaining regulatory compliance.
  • Control the rules and requirements in your data streams. Your FI should establish and control the security requirements and access between two applications – not your vendors.
  • Reduce switching costs. The only way your organization can reduce the cost, time, and complexity of moving from one system to another is by standardizing the integration language between systems – a critically important factor in your integration strategy and a major justification for adopting new integration tooling. And it provides your organization with increased negotiating power with incumbent vendors.

To reach this level of maturity, FI’s must begin by implementing a proper integration strategy and stop paying twice for customer data in your vendor management approach!

We enable data independence

If you don’t currently include integration and APIs as part of your strategy, we can help you develop the business justification you need to move forward. We’ve worked alongside many customers to develop a plan for assigning people, processes, tools, and budgets to integrate systems and eliminate dependencies on vendors. All you need to do is start a conversation with our team today.

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