It’s a common misconception that a company’s ability to connect its technology platforms directly to a financial institution without the need for a traditional banking portal is something new that fintech firms are bringing to market. However, this kind of metal on metal integration between corporations and financial institutions is not new.
What is new is the way the data is flowing between the parties. In the past, these connections relied on batch processing, where transactions were stockpiled during the day and then transferred en masse each night. It was a safe way to move the data without disrupting the company’s business during the day.
Today, industry technology has advanced significantly. Through the application of robust API layers, we can seamlessly connect systems together in ways that allow them to share data in real time. Furthermore, they can handle the data flow automatically, without any need for a user to log in to a banking portal to access the institution’s core banking platform, interrupting the flow of business.
The concept of “headless banking” makes it possible for banks to embed their services directly into fintech platforms, and it enables the US market to work around the lack of open banking in order to drive innovation and growth in the industry.
This is the next evolution in banking and institutions that fail to make this transition could miss out on lucrative corporate business.
The Wave of the Future…Almost
Currently, the nation’s largest banks are offering headless banking services to corporate clients, but few others have advanced beyond the portal or batched services model. There are many reasons for this.
Offering headless banking services is not complicated; however, setting up the bank’s platform to do so is a great deal of work that must be carefully planned and perfectly executed to achieve success.
While we are certain that Chief Financial Officers in virtually all of the nation’s top 50 banks have headless banking on their list of priorities, they face serious hurdles. First, none of these banks, with the possible exception of the few largest institutions, have the internal IT staff with the required skills to take on a project of this scope.
This means that the bank will need to go outside of the organization for the expertise to complete the work. It’s natural for institutions to approach this carefully, but failure to move forward will have serious consequences.
An Uncertain Future for Traditional Banks
Offering the next generation of banking services, including headless banking, involves an investment but one that will pay a high dividend. Even one large corporate deal lost to a competitor for lack of sufficient technology-based services will make the ROI clear.
But finding the right team can be a challenge. Our firm has been helping banks provide headless banking and other electronic banking services to their corporate clients for years now. Sitting down with our experts can make even the most complex bank technology project easier to contemplate, streamlining and removing risk from the decision-making process.
If your corporate banking clients are already asking about headless banking services, it’s time to have that conversation.