Fueled by emerging technologies and a shift in consumer expectations, change is happening at an unprecedented rate within payments. There are more ways than ever for consumers to move money quickly; specifically, with the introduction of companies like Zelle, Square and Venmo.
While customers and members tend to go to large tech companies for these services, they don’t have the same level of trust in them as they do with their financial institution. According to our recent survey conducted with The Harris Poll, more than three-fourths of Americans (78%) feel more comfortable with their financial institution having access to their personal data than a large tech organization. In addition, Blumberg Capital’s Annual FinTech Survey reported that two-thirds of respondents would trust new payment or investment technologies more readily if offered by their existing bank. In fact, more than half of respondents stated they prefer to use a traditional financial institution.
So what does this mean exactly?
Banks and credit unions have the ability to make strategic moves to regain control of the payment experience. Over the next year, three key technologies will prove beneficial in helping financial institutions control the payment experience: SDKs, APIs and microservices.
- SDKs – Software Development Kits (SDKs) are a set of tools, relevant documentation, code samples, processes and/or guides that allow developers to create software applications on a specific platform. Essentially, SDKs help companies incorporate financial features, like payments, into websites and apps. Building financial service capabilities from scratch can be a daunting task, but SDKs enable organizations to create applications with far less work and headache.
- APIs – API-based architecture enables financial institutions to create intuitive, modern experiences for customers and members. This configurable and scalable infrastructure provides financial institutions with the ability to continuously innovate and introduce new features and functionalities in payments. The industry is working together to support the standardization of APIs with organizations such as AfinisInteroperable Standards developing an API standardization “playbook” to help fintechs, banks and businesses effectively leverage APIs in the financial services sector.
- Microservices – Microservice-based software is already popular within the financial services industry, and will continue to grow in 2019. In fact, the microservice architecture market is expected to reach $32 billion by 2023, according to the Microservice Architecture Market – Global Drivers, Restraints, Opportunities, Trends and Forecasts report. A microservice is a development technique that pieces together a collection of loosely coupled services or applications to make a complete system or network. Microservices provide banks and credit unions the ability to expedite the development and implementation of new services and applications. The infrastructure also helps divide large systems and applications into smaller systems, improves modularity and makes systems easier to understand, develop, test and deploy.
These development tools can enable financial institutions to regain control of the payment experience, support digital banking services and keep up with consumer expectations. With this technology banks and credit unions can become more nimble, improve time to market for new solutions and strengthen their overall infrastructure.
Institutions must be committed to innovation. Consumers will continue to demand for new features and functionality, and banks and credit unions will be judged on their ability to adapt. The payments landscape will be one of the forerunners in this race; the demand for services like P2P and A2A make payments likely to be one of the major areas by which your institution’s overall services are judged.
Banks and credit unions that choose to take control over their payments infrastructure immediately with technology such as SDKs, APIs and microservices will be in a position to consistently update and evolve as the market demands.