Even pre-pandemic, there was a need for faster, easier money movement, and availability. To respond to the demand, FinTech vendors embraced open banking and architectures using APIs.
The banking industry’s FinTech innovation movement could help traditional financial institutions address problem areas, compete against and redefine outdated financial methods, and deliver financial services digitally, in new experiential ways.
Even the broad definition of the term “FinTech” has changed. Not too long ago, it was shorthand for the financial technology that provides much of today’s banking infrastructure. But now, it also encompasses trailblazing companies developing new exciting financial solutions in response to consumer demands.
While many industry specialists debate what comprises a FinTech, there is no denying the impact of these new banking players and potential partners (many of them startups.) In the process, the openness of banking technology expanded. This was made possible with the help of FinTech integration and accessible APIs. Now, a valued strategy is to embrace innovation and partnership.
FinTech Opens the Door for Financial Institutions
FinTechs are making more data available and providing Apple-like experiences to consumers. Non-bank providers are also aggressively targeting financial submarkets. This includes consumer and business loans, savings and personal financial management services, seamless payment options, as well as easier money movement and accessibility.
When FinTechs provide products and services such as these, they sometimes take consumers away from their financial institutions. This opens the door for new products that compete with community banks and credit unions.
To respond to these needs and changes of the market, some financial institutions and tech vendors have embraced open banking and architectures. Using APIs to position digital payments and innovation strategies, these companies are able to put the customer first. Additionally, financial institutions and FinTechs are seeking ways to link data and predictive analytics. This improves their complete customer experience.
The development cycle has also accelerated enormously and represents one of the biggest challenges for financial institutions. Partnering with FinTechs, instead of competing, can enable community financial institutions to evolve quickly, provide the same type of banking experience big banks can offer consumers, and accelerate opportunities.
FinTech Collaboration Using API Connector
An alliance with a FinTech company allows financial institutions to outsource tech development in a much more cost-effective, time-sensitive way. Before considering a FinTech collaboration using an API connector, financial institutions should consider the bank or credit union’s central tech competencies. FinTech alliances can fill tech gaps and have the ability to test and prepare new financial products and services in a nimble and quick way.
FinTechs can provide a different perspective to solve a specific problem, create and prepare solutions reasonably, and move quickly. Even working with a core vendor on a specific solution can turn out very expensive with a long development period.
Banks, credit unions, and other types of financial institutions should also consider a partnership or investment early in a FinTech's growth cycle. (This is when innovators are extremely eager to collaborate with financial institutions.) The investors also have tech resources readily available to help shape a bank or credit union’s direction and provide customization for a specific base.
Often, being the pilot customer for FinTech allows the bank or credit union to introduce new products and helps many founders go from conception to launch. This is possible with the complete backing of the financial institution’s resources.
Bank customers and credit union members expect immediate satisfaction. The internet, smartphones, and on-demand retail have all played a role in changing consumer expectations. That goes for financial institutions as well.
So, if a bank or credit union cannot use innovative technology to provide the online and mobile payment experience that consumers demand, the consumers will seek it elsewhere. It goes back to the question, "What is the consumers' goal?" Can a FinTech help an organization achieve that objective? This is the opportunity for both banks and FinTechs.
The open banking market generated $7.29 billion globally in 2018 and will reach $43.15 billion by 2026, per a recent Allied Market Research report. Driving adoption: new applications, services, and APIs.
A KPMG report, “A Digital Decree Reinventing the Banking Industry in Real-Time,” revealed that banking executives recognize that with new tech possibilities and expectations from customers, they must increasingly leverage digital technologies to expand how to serve customers and improve operations. “In the post-COVID world, digital desires are now digital demands.”
Did you know that the banking industry is one of the most active industries in today’s application programming interface (API) economy? Pressures from new entrants coming into the FinServ market drive the upsurge in API banking activity. Open banking and open APIs enable the digital transformation process and an exceptional banking experience to evolve quickly.
By using open APIs, credit unions and banks can integrate and be part of this FinTech innovation! Imagine the benefits. Financial institutions can thrive from these innovations. Imagine how delivering a better customer experience will help these banks and credit unions win back market share.
NXTsoft’s vendor-agnostic OmniConnect Platform, the premier open banking marketplace for all API needs, uses cutting-edge cloud technology to connect FinTech solutions to financial institutions, ensuring that NXTsoft clients have the most secure and reliable integration environment in the industry. OmniConnect provides the access needed to the financial institutions' information, removing integration obstacles and providing a seamless connection between third-party API solutions and financial institutions’ core digital banking, item processing, and financial systems.