Why Your Bank Needs to Own Its Tech Stack

In 2021, nonbanks owned 63.9% of the market share of average home loans. Nonbanks! And this was an increase from the previous year’s 60.7% market share. 

As a bank professional, you might have a love-hate relationship with technology. Just when you think you’re staying ahead of the competition and offering the latest services to your customers, something new pops up. It can feel impossible to keep up.

Especially when your competition has broadened beyond banks only. Good or bad, technology advancements are opening the door for all kinds of businesses to creep in on your territory. 

How do you take back your competitive edge? Own your integration stack. 

What does it mean to own the API tech stack in fintech?

Technology adoption is a key factor in who wins and who loses—in any industry. As consumers continue to seek banking and lending solutions that fit their lifestyle (aka digital options), banks need to prepare to meet that need. 

If you purchased a one-size-fits-all API management system, it’s even harder to quickly implement changes or new services. Pre-built fintech API tech stacks often don’t allow for customization to your specific needs, prohibiting you from creating leverage over your competitors.

Your frustrations might include:

• Technology and data that is held hostage by vendors, including your core provider.
• The need to use DIY tools to attempt to build a platform that achieves your goals.
• The headaches of managing multiple rigid and fragmented partners or platforms with expensive pricing and slow and spotty implementation.
• The time intensive maintenance of self-servicing these less-desirable options.

Owning your API tech stack in fintech does not mean you’re building the technology from the ground up on your own. Owning your bank’s integration stack is how the bank controls its technology and data. By partnering with the right solution, your bank can offer innovative and personalized customer experiences that meet the needs of the bank and its people.

Let’s dive in deeper. 

Modernization of Banking and API Management

Over the past five to eight years, APIs became a key component in the digital modernization strategy of most companies. Building APIs to connect systems to newer technologies or platforms allowed companies to move faster in the innovation race and extend the life of their existing technology. 

This success was derived from previously expensive and long-lasting modernization projects—75% of which failed. Companies were sick of massive software rewrites or product modernization plans that lasted years and crashed budgets. APIs were the solution to offer a faster and cheaper path to modern functionality.

With the increasing availability of APIs and integrations, there are two new questions emerging: 

• How should we manage the APIs?
• Should the company own the integrations or simply buy them?

This conversation is common in the banking industry. As we know, there is an extensive list of innovations banks would like to offer their customers to increase market share and maintain vital relationships.

Not only does your bank need to stay up to date with customer expectations, but you need to keep up with market shifts. You need access to data that is valuable. Data that provides a holistic and complete view of your customer, allowing you to gain insights and drive revenue opportunities. 

Build the Integration Stack: Becoming the Fintech Your Bank Customers Want

Thinking of your organization as a fintech in its own right, instead of just a bank, opens the door to a plethora of service opportunities:

• Ownership allows banks to leverage the best-of-breed integrations through open API management. 
• As additional integrations become available or customer expectations expand, banks can use internal teams or an integration partner to meet the changing needs of the consumer. 
• By owning the integration stack, banks can ensure business continuity and mitigate risk. 

How does ownership create continuity and reduce risk? 

If a bank that owns its integration stack is acquired, it retains its integration layer. This is critical because the API integrations are the gateway to the bank’s operations. 

On the other hand, if the provider of an integration layer used by Bank A is acquired by Bank B, Bank A now needs to be reasonably concerned about the limitations the new owner might put on the integrations. This problem is avoided if Bank A owned its tech stack.

On the other hand, if the fintech that Bank A was utilizing in its API management was acquired by Bank B, Bank A might have some concerns on the limitations the new owner might put on the fintech. Bank B could see Bank A as a competitor and use that to limit the fintech’s ability to provide integrations.

What to Look for in an Integration Partner

Flexibility and control are critical to the success of your fintech API tech stack. If you’re looking to expand your integration stack, or deciding if you should own or buy it, take these key points into consideration when searching for your integration partner.

Will your integration partner:

• Allow you to own the integrations, even taking the integration layer in-house if desired?
• Provide integrations the bank cares about and the customer needs?
• Have a bank-first mentality—will they solve banking frustrations like lending?
• Use a platform with the most up-to-date and reliable technology?
• Provide a platform that is secure and compliant?

Core10’s customers have experienced exceptional advancements in the services they provide externally and internally through our iPaaS (integration platform as a service) solution, Mesh Integration Service. Our partner, Encore Bank, recently spoke about the impactful changes our iPaaS had on managing costs and driving business lending. 

Own your integrations and delight your customers with Core10’s iPaaS solutions. If you’re ready to learn how our Mesh Integration Service can take your bank to the next level of service, let’s talk.