It's no secret that technology is always changing, and nearly every industry must reinvent itself regularly due to emerging trends and advances in technology. The banking and financial sector is no different. 

Direct-to-consumer Fintechs are providing compelling user experiences for onboarding new clients. Against this backdrop, banks and credit unions are handicapped by the clunky user interfaces and customer onboarding flows that are employed by their core banking systems.

In order to compete more effectively against the direct to consumer Fintechs, banks and credit unions are innovating and configuring branded consumer, commercial account opening and onboarding solutions that are compelling. These experiences provide insight and visibility into the conversion funnel and provide consumers with a delightful experience that is owned by the bank or credit union.

The last few years have accelerated the adoption of digital tools and technologies by consumers across all age demographics. As a result, banks and credit unions are looking to implement technologies to address the following business challenges:

• Opening accounts and onboarding consumers and commercial clients
• Originate and obtain loan applications and documents for consumers and commercial clients
• Reduce manual processing in the back office and pre-screen for KYC and other related compliance items while reducing fraud

However, this raises a question of how this information gets into the Core Banking System. How does this information get integrated into the existing flows in the bank or credit unions back office?

Getting data into your banking core system

There are many opportunities and pitfalls as one starts navigating approaches to getting data into your core banking system. Technology has evolved and matured to the extent that there are multiple ways depending on the business needs. The main tradeoff decisions to be made are around the following factors:

• User experience and ease of onboarding
• The openness of the core banking system
• The volume of transactions in terms of new customers or members
• The volume of loan applications for consumer or commercial clients
• The existing back office workflow within the bank or credit union

Business driven approach to Integration

The banking core system landscape has developed over several decades. Core systems range from open, cloud based systems to mature systems that have open APIs to close legacy core systems. There are different approaches that work based on the business tradeoffs. The following are some core banking systems that provide an API or a level of openness that facilitates the flow of data in and out of the system.

Depending on the level of API support and the business needs, there are five approaches that can be considered as a way of digitally onboarding customers onto your core system.

1. Real-time Interfaces
2. Near real-time interfaces
3. Loosely coupled interfaces
4. Smart process integration
5. Backoffice Workflow Integration

There are a number of opportunities and pitfalls to consider with each approach.

1. Real-time system interfaces

Real-time interfaces are ones that are based on REST Api or other similar API. The API provides a way for authentication, access control and error handling. In most cases, the documentation is available and standard implementation plans can be followed. 

Opportunities

• Compelling user experience and high onboarding conversion rate
• Data is instantly available on the core system
• Ability to handle large volumes with no manual effort

Pitfalls

• Integration & testing could take from 2 weeks to 2 months
• May not be able to justify the effort if the volume is low

2. Near real-time interfaces

Near real-time interfaces are ones that are based on an asynchronous approach that does not affect the user experience.  The near real-time interfaces provide a way to leverage the import and exporting capabilities of the core system. In most cases, the documentation is available and the implementation is quicker. 

Opportunities

• Compelling user experience and high onboarding conversion rate
• Data is available in near real-time in the core system
• Ability to handle large volumes with no manual effort
• Effort to interface is lower

Pitfalls

• Data is not available in the core system in real-time

3. Loosely coupled Interfaces‍

Loosely coupled, asynchronous interfaces allow the user to have a compelling user experience while not being directly tied in real-time to a core system.  This is an approach where the systems are loosely coupled. These interfaces could be timed every 30 minutes to hourly and use the import and export features of the core system. In most cases, it leverages existing infrastructure and interfaces and is easy to modify.. 

Opportunities

• Compelling user experience and high onboarding conversion rate
• Data is available in near real-time in the core system
• Ability to handle large volumes with no manual effort
• Effort to get data into the core system is lower
• Easier to upgrade and modify the interfaces

Pitfalls

• Data is not available in the core system in real-time

4. Smart process integration‍

Smart process integration is a great approach for use with core systems that do not have an open API or when internal IT staff are burdened with other priorities. This approach leverages the core system for what it does best and supports the existing business processes that are used to get the information into the core system. It uses Smart back office process tools to automate the collection of documents and notifications in order to reduce the manual effort that is needed. Once all the information is collected, the information that is collected into the onboarding flows are taken into the core system the same way that applications collected at the branches are put into the core system.

Opportunities

• Compelling user experience and high onboarding conversion rate
• Data is available in in the core system in the same cycle time as applications collected in the branches
• Reduces the manual effort needed in the back office
• Leverages existing back office processes; less change to the organization
• Easier to upgrade and modify the interfaces for new products

Pitfalls

• Data is not available in the core system in real-time
• The cycle time on when the information is available in the core system will not be improved from current standards

5. Back Office Workflow integration‍

Back office workflow integration is a great approach for use with core systems that do not have an open API or that are legacy systems. This approach leverages the core system for what it does best and supports the existing business processes that are used to get the information into the core system. The information that is collected into the onboarding flows are taken into the core system the same way that applications collected at the branches are put into the core system.

Opportunities

• Compelling user experience and high onboarding conversion rate
• Data is available in in the core system in the same cycle time as applications collected in the branches
• Leverages existing back office processes; less change to the organization
• Easier to upgrade and modify the interfaces for new products

Pitfalls

• Data is not available in the core system in real-time
• Not ideal if the expected growth volumes is orders of magnitude higher than what is received from the branches currently

What is the best approach?

The best approach depends on your bank or credit union's business objective. It depends on the anticipated volume of consumer and commercial onboarding volume. Depending on the volume, any one of the above approaches could work and as the volume becomes more predictable, other approaches could be adopted. It is important to balance the business objectives against the anticipated effort and pick the one that provides the best anticipated result for the lowest possible effort.

Many of the large financial institutions have the advantages of large marketing budgets to attract and retain customers, but Cotribute helps level the playing field for banks and credit unions with easy-to-implement software that can seamlessly integrate with your core banking system. If you have any core integration questions that you are grappling with, our experts will be happy to provide you with experienced advice. If you'd like to learn more about who we are, and what Cotribute can do for your business, please schedule a demo today!