Independent Banker - October 2022 - 35

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partners, community banks also have
to meet customer demand for mobile
and online access; ease of interaction
and connection; high-quality service;
and security and fraud protection.
The emergence of digital-only banks
is another driver, and namely because
those firms may be more tech-forward
than traditional banking institutions.
Spurring digital transformation
" Digital-only banks offer a smaller
set of traditional bank products, but
they also have well-designed mobile
user interfaces, " says Chris Cox,
chief operating officer at Apiture, a
cloud-based banking platform. " This
is putting some pressure on banks
to move forward with their digital
transformation. "
Those using legacy core systems
may face the choice of replacing these
solutions or finding ways to connect
modern digital banking solutions into
their existing platforms.
McKinsey and Company refers to
the latter as " hollowing out the core "
and says it's all about extracting
smaller applications and services in
an effort to extend the existing core
banking system's service life. This is
where open APIs come in. By allowing
banks to attach outside solutions to
their cores, APIs make it " easier and
" [APIs] allow banks to offer new products-
from new variations on traditional demand
deposit accounts to brand new products
that didn't even exist before-all while
keeping the core itself in place. "
-CHRIS COX, APITURE
more efficient " for institutions to
gain access to modern capabilities,
says Cox.
Once in place, these digital banking
solutions leave the transaction
processing; balance storage; and
calculation of interest and fees to
the core or " guts of the bank, " Cox
explains. " Then, they allow banks
to offer new products-from new
variations on traditional demand
deposit accounts to brand new
products that didn't even exist
before-all while keeping the core
itself in place. "
Filling in the gaps
QUICK STAT
52%
The percentage of community
banks satisfied or highly
satisfied with the technological
sophistication of their external
core processing services
Source: FDIC, Community Banking in the 21st Century 2021
As digital transformation continues
to dominate conversations across the
community bank's C-suite, the idea
of using plug-and-play technologies
to address " financial fragmentation "
and fill in the gaps is gaining steam.
" Everything is starting to move
toward an API-first architecture
across all of the various fintechs and
software providers, " says Joshua
Jordan, senior strategist of digital
experience at Jack Henry.
As part of that shift, what was
formerly known as " online " or
" mobile " banking is now being called
digital banking and is supported
by APIs that are free for anyone-
including community banks and
fintechs-to use. Banks that already
have core solutions to handle balance
inquires, funds transfers and bill
payment, for example, can use
them to add credit scoring, budget
tracking and/or financial wellness
capabilities to a system that's " open "
to those APIs.
Of course, the decision to replace
a central software system or use
open APIs to add new functionalities
to it is a big decision for any
community bank.
Having gone through both
scenarios, Fischer says a good starting
point is to talk to other institutions
about their approach, how it worked
for them and what challenges they
encountered along the way. Talk to
vendors about their offerings, he says,
and look for a solution that best fits
your environment.
" I think that ICBA has done a
nice job with [the ThinkTECH
Accelerator] and bringing in hundreds
of providers that can help and consult
on these issues, " Fischer adds. " The
key is to look outside of your own
bank for assistance; we all need
help pinpointing the solutions that
customers are expecting these days. " 
Bridget McCrea is a writer in Florida.
independentbanker.org Q 33
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Independent Banker - October 2022

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