BoB II: Revenge of the API
By John San Filippo
Authors note: I recall talking with Warren Marshall, then CEO of Stanford Federal Credit Union, in the late 1990s about a movement he affectionately called BoB – short for best of breed. Up to that point, most credit unions blindly accepted the ancillary products sold by their core vendors. According to Marshall, credit unions that wanted to remain technologically relevant needed to shop for best of breed technology and patch that technology into their core platforms. He told me that credit unions needed to pressure their core vendors to play along. This all worked for a while. Many larger credit unions climbed onboard the BoB train to technological freedom. After a few years, though, a good number of these credit unions realized that managing all those relationships and disparate interfaces was a truly herculean task. Thus, the pendulum swung back to core-provided ancillaries. Fast forward to 2020 and it now seems that APIs are poised to finally deliver on the promise of BoB.
“We’re going through a creative destruction of financial services,” said Nicole Harper, manager and senior analyst, Industry Insights and Intelligence, for Jack Henry & Associates. Jack Henry’s Symitar division provides core processing for hundreds of U.S. credit unions. “The new battleground is around member experience.”
Harper added that COVID-19 has accelerated the need for self-service at the moment of need, forcing credit unions to be nimbler than ever before. She warns, however, that credit unions cannot lose sight of the power and need for humans to connect to humans.
“COVID-19 really drove home how important it is for credit unions to have a solid digital strategy,” said Amber Harsin, CEO of core processing CUSO Prodigy. “Members need to be able to digitally interact with their money and digitally interact with credit union employees about their money.”
All this points to the need for credit unions to be able to easily modify existing technology and quickly deploy new technology. This need has given rise to the development and use of application programming interfaces, or APIs. An API provides a standard framework that third parties can use to interface their products to, for example, a core processing platform.
“A truly open API is one that gives credit unions and their vendors access to every function of the core,” added Harsin.
Manny Pelarinos, vice president of Architecture and Platform Engineering for Fiserv, agrees with Harsin’s stance. “Companies used to build APIs for known use cases, for example home banking,” he said. The problem with these limited-scope APIs, Pelarinos added, is that they’re ill-prepared when something new comes along. “A credit union can only future-proof itself if it’s core offers 100% API access with no exceptions.”
Corelation’s Chief Technology Officer Jeff Dent explained that credit unions are currently being pushed to offer products and services through the digital channel that they used to provide in some other way, for example Paycheck Protection Program loans and skip-a-pays.. “If you’re accessing everything through one API and do not have to understand different protocols, that is the ideal world,” said Dent adding that Corelation is so confident in its KeyBridge API solution, the company relies on it for much of its internal development.
A robust API enables two key strategic objectives. The first is an absolute minimum time to market with new products and services. “Anybody can make anything work,” said Dent. The question is how quickly and how easily.
The second is the smooth and complete flow of data between various software platforms, allowing all credit union data to be aggregated in the core. That in turn can lead to a superior member experience – as long as the credit union is willing to use that data in new and innovative ways.
“What if your credit union could predict why you are calling or visiting the branch just by analyzing the available data,” asked Pelarinos. “For example, if the member just experienced an account lockout or had multiple nonsufficient fund fees, there’s a good chance that’s why they’re calling.” If the MSR knows that at the moment of contact, he added, they can create a much more proactive member experience.
Harper offered that an API-driven technology allows credit unions to craft a much fuller member experience and modify that experience whenever necessary. “The financial institutions that will win are the ones that take an outside-in approach where they’re guided by the consumer’s wants and needs,” she said.
“Data in a modern core system is more accessible than ever before, but it’s not just about access,” added Harsin. “Credit unions need to use the data.” She acknowledged that this can be a challenge for smaller credit unions with limited resources. For these credit unions, she recommended exploring the various CUSOs that specialize in this field.
The whole world is changing fast and the financial services landscape is no exception. Credit unions need to keep pace to remain relevant. “Failing fast with new ideas is more important that getting it 100% right every time,” concluded Pelarinos.