Fintech Insights

Community Banks Can Meet Digital Banking Needs with Open Banking APIs

Jim Johnson, EVP, Financial Institutions Payments, FIS

July 02, 2018

To compete with large national banks and maintain a competitive advantage, community banks need to collaborate with fintech partners who can help integrate new technologies that result in greater efficiencies, increased profitability, and secure transactions. All this while making the institution appealing to new generations of customers who expect flawless, easy-to-use, anywhere, anytime access to banking and payment services.

An important fact to consider: the way banking customers make payments, for example, is changing faster than any other area of financial services, impacted by changes in digital technology, the competitive forces at work and growing consumer demands influenced by your customers’ experiences in other industries. What is clear is what has worked in the past will not work in the future. Managing change and the speed of product innovation and adoption will be critical for banks and credit unions to grow and thrive.

The Digital Opportunity. What is Your Strategy?

Digital is the new norm in banking – it’s not just about digital payments, it’s digital everything. Today, banks of all sizes need a proactive, cohesive digital strategy that provides the right products, services, and best possible customer experience. Why is a digital strategy so important? For one, Boomers are aging and as a group their numbers are on the decline although they will continue to be the wealthiest generation in the country until at least 2030, according to Deloitte. They are also set in their ways with whom they bank and how they bank. Next, the massive growth opportunity for community banks is with Millennials and Gen Z. Accenture projects Millennials to make up as much as 40% of U.S. consumers by 2020 and today are the largest generational demographic group in the history of the United States. Additionally, a recent New York Times article says Gen Z’s projected size is 60 million in the U.S. alone; a generation totally brought up on social media sites like Instagram and Snap Chat. Name the number one television network for Gen Z and the answer is not NBC, CBS or Fox, it is YouTube.

Also, worldwide retail eCommerce sales totaled nearly $2 trillion in 2016 according to the latest report by eMarketer, and is projected to top $4 trillion by 2020 fueled largely by Millennials and Gen Z’s desire for shopping value and convenience.

Partner and Product Centric Approach

To help community banks meet the challenges they face today with adoption of digital payments technologies, the FIS customer experience offers a partner and product centric approach – making it easier for rapid product adoption. These include cash displacements through new payments flows, platform modernization and financial inclusion.

An important way FIS is increasing speed of delivery of new business functions is through the FIS Code Connect API Library. The API library provides simple integration of new innovations and existing technology, delivered and developed through FIS payment platforms, into a single unified digital solution. Code Connect provides a robust developer portal, an easily navigated API catalogue and fully operational monitoring and security services. As a result, community banks can easily integrate new FIS services and utilize them across the enterprise to meet member timeline expectations.

Open Access Banking is Key

According to the FIS 2018 PACE survey, community bank customers now use mobile apps more than customers from other types of banks, with 53% claiming to use apps more now than one year ago. That is very impressive growth. Consumers are doing more “core” business on financial mobile apps, such as making investments, applying for loans and even opening new accounts. This will only continue as open access banking makes its way into the mainstream.

Open banking is an opportunity for community banks to engage the right tech partners and create a win-win situation that expands usage of and loyalty to their services. The 2018 PACE findings say,” this might be one of the best and most agile approaches for banks to add the ancillary products and services their customers want.”

Community Banks in Great Shape to Capitalize on New Technology

Community banks continue to grow and prosper. The 2018 PACE Study says that 8 in 10 customers are satisfied or very satisfied with their community bank provider. This means that the customer base is loyal and is not eager to jump ship. However, this also assumes that the bank is keeping pace with technology and offering the digital products and services customers have come to expect. Customers will move to another banking provider if their digital needs are not being satisfactorily met. Mobile is now seen as the main branch by many consumers. All generations except baby boomers (and older) bank on their phones and tablets more than via desktop PCs, ATMs or physical branches. In addition, PACE says that “feature parity is here. Community banks that introduce features like P2P payments see rapid adoption, and it has never been cheaper or easier to add national bank digital capabilities.”

Speed to market, quality delivery and member self-service models are all now table stakes in the banking industry. Products that are in demand and operate seamlessly will drive new member penetration and lead to greater revenue opportunity for your bank.

Tags: Digital Innovation, Investments, Technology