Independent Banker - October 2021 - 57

computers, " Potts says. " How is an
open API for a [software-as-a-service]
SaaS-based product any diff erent than
a middleware tool we built decades
ago? While technically it may be,
functionally it's not. We're giving the
customers a diff erent way to assess
and access the information and
transform it. "
But given that community banks
don't often build their own core and
operational systems, moving into
this new open banking and open API
paradigm requires engagement from
third-party providers, many of which
have begun off ering new inroads to
support greater access.
" The best way to secure the future
of community fi nancial institutions
is to ensure that they have the
technical agility to execute against
strategic agility, which is to say they
can partner, connect or integrate at
will with any vendor, provider, third
party or fi ntech of choice without
ultimately having to have that gated
or controlled or in any way slowed by
a provider, " Wetherington says.
MARKET DRIVERS
All these shifts in the landscape may
be causing community bankers to
ask, " Why now? " With signifi cant
movement in open banking in other
geographies-94% of global fi nancial
institutions report open banking is
a must-have or important to their
organization, according to Finastra-
outside pressures are mounting. In
fact, the same study found that 72% of
U.S. bankers believe shared data and
infrastructure will become the norm
across the industry.
Couple that activity with the
growth in venture capital funding of
fi ntech opportunities, and additional
infl uences emerge. The second quarter
of 2021 was the largest funding
quarter on record, growing 30% over
the previous quarter to a record $30.8
billion, according to CB Insights.
Beyond the funding paradigm, the
pandemic has heightened consumer
expectations of digital services. In fact,
69% of consumers expect companies
to create innovative ways of accessing
existing products and services, and
54% want modern types of products
and services, according to a late 2020
survey from Salesforce.com.
" In the last year, with the COVID-19
situation and all of the digitization,
you have more fi ntechs seeing
opportunities for the customers of the
OPEN BANKING IS SOMEWHAT
IN THE EYE OF THE BEHOLDER.
WHILE THERE HAS BEEN
AN ATTEMPT BY A LOT
OF INDUSTRY PUNDITS,
ANALYSTS AND VENDORS TO
DEFINE WHAT IT MEANS, THAT,
BY ITS VERY NATURE, HAS
CREATED CONFUSION. "
-CHARLES POTTS, ICBA
bank, " Licht says. " With community
banks, if they want to be innovative,
this is the approach. "
OPEN BANKING FOR
COMMUNITY BANKS: BAAS OR
EMBEDDED FINTECH?
For community banks, there are
two major open banking options:
BaaS or embedded fi ntech.
In the BaaS model, the bank
off ers its products and solutions
to a fi ntech or other third-party
provider, and that organization then
benefi ts from the bank's expertise in
everything from risk management
independentbanker.org Q 57
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Independent Banker - October 2021

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