Fintech Commentary By Jackson Hataway, Missouri Bankers Association
Fintech and the Core: Te March Toward Open Banking
Bank after bank will tell you the same: we would love to partner happen. Te core provider relationship is typically a bank’s most important and expensive vendor contract. For years, the core landscape has been dominated by a handful of providers that have built ecosystems of integrations. Tose ecosystems limit banks to either choosing pre-approved partners or making significant investments to build out integrations.
Banks, along with trade groups like the MBA and the American Bankers Association, have placed increasing pressure on core providers to be “open” in their approach to data management and integration. Platforms (core or otherwise) that are open allow much simpler API access than closed platforms. Tat enables new partners to be integrated with relative ease and at much greater discretion by the users. Tis falls in line with a continual trend toward open banking in general, an approach to banking in which consumers have full control over which applications and entities are integrated into their financial services experience.
Putting security and cost concerns to the side, the battle to lead core providers to develop open platforms has been largely one-sided. Te largest core providers have indeed made technological strides that reflect open architecture philosophies, but those advancements are largely within walled garden ecosystems. Tis has led to many bank executives to say, “Te promise of an open platform is there, but the delivery is not.”
Te good news is that we are finally seeing some real momentum toward open architecture among core providers, and not just from start-ups. Tere are commitments to strategies that position legacy cores to respond to industry calls that we can only hope will build market pressure on all
participants. Te most aggressive strategic vision we have seen to date was presented by Dave Foss, president and CEO of Jack Henry & Associates in the first quarter 2022 earnings call.
In his comments, Foss described a new long-term strategic path for Jack Henry that will focus on unbundling the core. Te technology behind the core will become component-based rather than package-based. Tis approach will enable banks to select particular products and services that are isolated from one another rather than interdependent, the historic core model. He gave specific examples of unbundling account opening, wire processing, deposit processing and account servicing. Tese services will be cloud-based with revised contract guidelines and that will, theoretically, enable banks to integrate the partner set that makes the most sense for their business.
Foss’ statements go much deeper into Jack Henry’s overall technology modernization strategy, referencing open architecture, real-time data flows and new lines of service. I encourage you to read it. Of course, Jack Henry is not abandoning its current products or clients. However, his comments showcase a significant awareness that status quo is simply not an option for banks and their customers, no matter how large the core provider may be.
It is far too early to say what the actual technology structure will be when rubber meets the proverbial road. It also is too early to count the proverbial chickens. Tat said, we should be excited as an industry that a large public core provider laid out a new strategy on an earnings call because that is a very difficult promise to walk back. Couple that with developments among start-up cores, and I think we should all be hopeful that the bank technology you always wish you could use will be the technology you get to use in the next five years.
THE MISSOURI BANKER 13
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
