Here’s the key to bringing new fintech to your core banking system

Today’s banks are increasingly complex and dynamic. Like a human brain firing countless neural signals, banks execute thousands of transactions each day. They navigate intricate processes, from loan origination to withdrawals, deposits, and credit. Just as our bodies actively work every moment to sustain us, often without our awareness, many crucial bank functions operate entirely behind the scenes.

Then, there are the highly visible activities, like providing customers with the best experience possible. The challenge? Seamlessly integrating data so that these diverse use cases can work together flawlessly.

Fortunately, banks have core banking systems that act as the “central nervous system” or “control center” of the institution. These systems play a critical role in managing a bank’s daily operations, processing thousands of lines of customer data. And as banks have embraced digital innovation, organizations increasingly turn to fintech partnerships to achieve their goals, ushering in even more data.

While in an ideal world, a bank’s legacy technology would integrate with new technology partnerships seamlessly, the reality is that core banking systems often face issues when integrating with new technology stacks. This can quickly become a stumbling block on the path to banking innovation.

Take Colony Bank, Georgia’s largest community bank with just over $3 billion in assets. Like many others, it relied on its core banking system for third-party fintech integrations. However, the pace of each integration was slow and laborious, taking up to six to nine months and requiring hours of significant manual data entry. Colony Bank turned to a solution that could act as a bridge connecting its core banking system with its fintech partnerships.

Enter: middleware.

Speeding up tech integration to satisfy today’s banking customers

Why are banks increasingly investing in fintech partnerships? For one thing, an estimated nearly $100 trillion wealth transfer is estimated to take place from Baby Boomers to their children and grandchildren from now into the next 25 years. That means banks are rapidly working to adapt to the changing needs of the next generation of banking customers, many of whom prefer to manage all their finances in one place. There’s also an increasing desire for services such as P2P payments and Buy Now Pay Later to live directly within a banking app. In response to these demands, banks are shifting their focus on providing fintech services in-house and making transactions easier, stickier and faster for both retail and business banking.

Too often, fintech integration is still taking too long, turning executives away from pursuing additional technology projects. A strong middleware partner can ease the burden, providing time and cost savings, seamless data access and faster time to market.

For instance, middleware partners with the best handle on the issues that today’s banks have in data integration uniquely offer a range of “recyclable” APIs rather than one-off data requests.

This allows institutions, especially community banks like Colony Bank, to efficiently map all data fields from their core banking system to a middleware provider. Instead of repetitive data mapping for every fintech integration, the data becomes readily available and accessible. From there, subsequent fintech partnerships become a straightforward process, eliminating the need for the transferring, mapping and uploading of data from scratch for each and every project.

Starting at the ‘middle’ and ending with a culture of innovation

Prior to investing in middleware solutions, banks should do their vendor due diligence. As institutions that carry some of the world’s most sensitive customer data, ensuring data security is key. Banks should deeply examine a middleware partner’s security controls, data retention policies and disaster recovery procedures and processes. Then, expectations should be set for a shared standard of security.

Next, the project steering group should create a compelling use-case to get started with. Ideally, this should be one in which significant time savings and cost savings are needed. Consider value-add projects that are mission-critical, for example, enabling online account opening to further drive deposit-gathering initiatives. Second, scope out the project beforehand, setting realistic budgets. Have second and third-tier projects in mind for the future after the initial project to demonstrate continuity of the investment.

Initiated from the top down, the relationship between Colony Bank and its middleware provider led to much more than the initial scope of work – it led to a cultural shift in favor of digital transformation at the community bank. It opened up valuable time across resources, redirecting focus away from slow, manual work to tangible, high-reward priorities.

Pam Kaur is Head of Bank Technology at BankTech Ventures, which has investments in PortX and other strategic fintech solutions for community banks.