Third-party integrations with a bank’s core system have quickly become a trend in the fintech industry. This makes sense for a few reasons: 1.) Today’s customers are looking for more digital products and paperless options to make banking convenient. 2.) Customer demand has caused a technology revolution with more and more third-party product vendors venturing into the community banking space. 3.) Startups and national organizations like ICBA are supporting these players by cultivating an environment for bankers to learn about and interact with new vendors.
With customer demand on an upward slope and technology evolving at such a rapid pace to meet that demand, no one can keep up with or be the expert on innovation all the time. This is why many cores have partnered with third-party vendors to offer banks the ability to expand their product suite in a time where they need it the most. However, while this partnership serves up a multitude of benefits, it can also have its drawbacks. If a bank doesn’t fully understand the integrations process and doesn’t have an honest conversation with their core provider, an integration can cost the bank in more ways than one. Avoid being caught in frustrating situations like the one in the following example and read a few do's and don'ts when considering an integration with your core.
Consider the following scenario...
"ABC" Bank recently learns of a payment platform at "DEF" company that would greatly benefit their business. They reach out to their core provider who has mentioned in previous discussions that they have an open API and can integrate easily with many third-party vendors. The bank asks if their core can provide the integration with said company, and their core responds that it won’t be a problem. However, when the bank receives the addendum for the integration, they realize that it’s going to cost them thousands of dollars plus a conversion timeframe of 24 months at best. The integration is more complicated and more expensive than the bank expected and, worse yet, there’s no other way around it…or is there?
Third-Party Integration Considerations
Avoid being caught in the all-too-common scenario stated above. When considering integrations to your core, use these tips to guide the process and lead the conversation with your provider.
Do learn the lingo.
Many technical terms are often thrown around and it’s important to know what they mean prior to having a conversation with your core provider on integrations.
API: An API (Application Programming Interface) is a common tool that enables software to interact with other software. When we talk about having an “open API”, it means financial institutions can allow third parties access to their financial information, so vendors can develop new apps and services. Having an “open API” specifically refers to the code being readily available, which allows for adaptability for integrations of your choice.
Integrated vs Interfaced: A "true" integration means that the applications and systems at play work as one solution. If data is changed in one system, the other application will see it the moment it changes. While an interface means there are two or more systems that share information with each other, but data is maintained and accessed in multiple locations. As an example, a product like a document management system may be interfaced to your core and able to pull information from your system and operate independently without a true integration. However, by not having an integration directly to the core, there is a higher chance of duplication and misinformation across systems.
Do research third-party vendors ahead of time.
Having a preferred list of partners is fairly common with core vendors. If you’re not familiar with them, do some research. Look at case studies and reviews, and ask for referrals to speak with other banks who have added the integrations to their product suite. You’ll want to know about the quality of the product and the experience of the integration itself.
Do read the fine print.
You might have a great, initial conversation with your core provider on integrations, but the contract will specify the terms and conditions. Make sure what’s in fine print reflects your best interests. It should include details on delivery costs and conversion timeframe, along with any extra costs for using the third party of your choice. Additionally, look out for: compounding price increases over time, if the contract auto-renews, and what the process is for product updates and enhancements.
Don’t be fooled by smooth talk.
Many core vendors will tell you they have an open API and can integrate with hundreds of third-party vendors. This is just for “wow” factor. For one: “Integrating” with hundreds of third-party providers is sometimes not a true statement. And second, bigger isn’t always better. Just because there are hundreds of options available may not mean they are all high-quality integrations.
Don’t be afraid to bring your partner of choice to the table.
Just because a core provider may have their list of preferred partners doesn’t mean you have to settle. If you have a third-party product you’d like to have integrated into your core system, it doesn’t hurt to ask. Just make sure if your core provider says they can accommodate the integration that you ask about any associated fees or related costs. Often there's a charge for the integration itself and service fees based on account volume.
Work with a core vendor that makes integrations painless.
Many legacy providers overpromise and underdeliver when it comes to third-party product integrations. That’s why it’s important to work with a core provider who offers competitive solutions in the community banking space and whose technology is adaptable, agile, easily interoperable with third-party solutions, and who delivers on time.
At IBT Apps, we work with partners that share our same passion for serving community banks through innovative solutions. Recently, we partnered with MK Decision to offer banks like yours a digital account origination product that is integrated to our i2Core platform. Banks interested in this integration can expect a delivery timeline of at most six months; that’s a 25-50% increase in ROA!
Learn more about our partnership with MK Decision by reading the recent press release.
Additionally, connect with us to talk more about integrations and discuss the opportunities available for your bank.