Once Digital Banking Solutions, Now Entire Ecosystems: Are You Caught Up?
In this age of digital disruption, when Software as a Service (SaaS) is nearly a household term, the global fintech community in particular has seen a staggering proliferation of solutions aimed at transforming and digitizing the customer experience. It makes sense – most of us now interact with some form of digital banking on a daily basis. Checking your account balance, making a loan payment from a mobile device, and sending money to friends and family have all relatively quickly become routine digital interactions. And, with the popular trend of open-API approaches to design, which helps break down the barriers to integration and makes it easier for new solutions to break into the digital space, it’s unlikely that the transformation of this area will slow any time soon.
Perhaps this is thanks in-part to social media platforms that have helped shape our expectations of a modern user experience and created a community of customers who increasingly expect alerts and delivery methods to be immediately available and customizable. Common examples might include balance threshold alerts (when a balance goes above or below a certain amount), transaction type alerts (if an ACH transaction happens on an account), sign-in alerts, and transaction approval requests for commercial/business banking. These alerts are expected to be received via mobile push notification, SMS, email, or a combination of these immediately.
One of the main issues with alerts from digital banking however, is how events are handled within an FI’s core processor. If the core does not have a system in which it can alert third parties to activity on an account, there is no ideal way to pull this data into a digital banking environment. It’s for this reason that a tight integration between the digital banking platform and the core is essential.
Incorporating Enterprise Information Management (EIM) solutions into user-facing applications is also becoming increasingly common in the space, as financial institutions are quickly learning that when paired with the right digital solution, EIM systems can offer huge benefits to the FI. Bridging the two systems goes beyond just consolidating and indexing data, it enables end users self-service access to any customer-facing documents through a digital banking interface. These systems can be made proactive as well. For example, if a customer’s driver license is about to expire, an automated message can be pushed to the user with a request to upload their newest document.
Having put so much technical emphasis and investment dollars into consumer digital banking over the last decade, especially around mobile solutions, FI’s are beginning to take notice of an opportunity to extend many similar services to their commercial SMB clients as well. The execution of commercial mobile banking however, is still somewhat divided: some financial institutions have created a commercial mobile banking app that is completely separate from their retail one. Other FI’s have created a unified app that has an option to login as a commercial / business user. The former option provides a user experience completely tailored to commercial users, while the latter is a convenient and unified approach that means one less app to update. Both options are viable in today’s market, but there is one major need that will have to be met by any competitive mobile commercial banking app: payment functionality tailored specifically to meet the needs of SMB customers.
As a faster and more cost-effective alternative to manage daily transactions, commercial mobile deposit has begun to see increased adoption by customers of FI’s that already offer it. Having previously relied on a dedicated check scanner and corresponding software installed on a PC for commercial check capture, this unique flavor of mobile deposit now differentiates itself by allowing for the capture of multiple check items using a smartphone. Apart from efficiency and ease of use, this of course also brings the benefit of eliminating the SMB’s hardware and software overhead associated with traditional approaches to commercial RDC.
Another trend now freshly, yet firmly, entrenched in the digital banking space revolves around Person-to-Person (P2P) Payments and real-time payment options. There are currently two approaches to Fast P2P Payments: Same-Day ACH and Fintech’s newest elephant in the room, Zelle. 2018 saw the third and final phase of NACHA’s Same-Day ACH implementation plan, bringing faster, but not necessarily always true ‘same day’ settlements. Traditionally, ACH could take anywhere from 1 to 3 business days to move money from one account to another. Now, NACHA has sped up that process by adding two additional daily settlement windows and requiring that funds from transactions processed in the day’s first two windows be made available by 5:00 PM local time. There are however, two caveats to this system: Same-Day ACH only works for credit transactions (NACHA rules require that debit settlement still takes several days), and they must be posted within the first two settlement windows to be settled that day.
While Same-Day ACH speeds up payments by building on existing technology, Zelle has rewritten the rule book, enabling them the capability to perform Instant P2P Payments. Zelle, like its parent company Early Warning Services, is a collaborative effort that was created by a cooperative of some of the largest American banks to rival PayPal’s P2P product Venmo. Zelle allows for truly instant payments with instant funds availability. These speedy transactions are achieved through Zelle’s partnerships with core processing providers. A core processor must be partnered with Zelle in order to process and settle these instant payments, otherwise the originating FI reverts back to standard ACH-type routing.
But, with many emerging technologies and consumer demands, banks must embark on a digital journey that is tightly integrated with their core, and still flexible and scalable to address diverse needs of their user-base.