Six questions you need to ask before buying a new core banking system

Here are the six questions you need to ask when considering the value of APIs in your core banking system.

You may not be able to see into the future, but you can still make your institution future-proof. Any change you make is an opportunity for customer acquisition now and in the years to come. They key lies in the fundamental philosophy of your core banking system, and at the heart of that is your API.

The changing environment

As ever, things have been changing rapidly in the world of financial services.

Traditional, long-standing institutions have found themselves challenged by a new breed of providers: branchless neobanks, quasi-bank providers, online lenders, and fintech startups.

The fintechs have driven new variations on traditional financial products, like the Buy Now Pay Later craze sweeping the world.

Consumer habits and expectations have been transformed by their experience of smartphone apps. The COVID-19 pandemic has only accelerated this change. During lockdowns, people sought new ways to conduct transactions without visiting branches, and ways of paying for things without physical contact.

For institutions unwilling or unable to cope with this changing landscape, the result can be extinction. In the Philippines, for example, the central bank ordered the closure of no fewer than five rural banks and co-operatives during 2020 alone.

The maxim “adapt or die” has never been more true.

Adapting to an unknown future

Of course, no one can predict the future, but here’s one prediction that can never fail you:

The future will be different from today.

That doesn’t mean you should envisage a terrifying, uncertain, apocalyptic future. In fact, the knowledge that things will sometimes be unpredictable can be your North Star, your guiding principle. You can even use that uncertainty to your advantage, all thanks to comprehensive banking APIs. 

What are APIs?

APIs (Application Programming Interface) act as intermediaries between applications so they can communicate with each other.

At their most basic, APIs allow one application to view, retrieve, input or update information in the other by passing on requests and returning data.  

We use APIs every day without even thinking about them. They facilitate everything we do on the internet: APIs form the connections between your browser and your search engine, for example. They allow you to ask where the nearest vegetarian restaurant is, and for Google to tell you. In short, APIs enable applications to talk to each other.

APIs are often likened to a very efficient waiter in a restaurant. The waiter will take your order and – provided what you want is on the menu – will take it through the swing doors into the kitchens and pass it to the chef. The chef will prepare the dish and give it to the waiter who brings it back to your table. One of the beauties of this system is that the waiter doesn’t actually need to know how to operate the cooker or where to find the ingredients – they simply need to act as the go-between between you and the kitchen.

The restaurant proprietor is equally happy with the arrangement – a customer can’t just take two eggs when they’re only entitled to one, and nor can their efforts to bypass the waiter and fetch the meal themselves result in them burning down the entire establishment.

Like the best waiters, APIs are fast, invisible, and flexible enough to adapt to uncertain and unpredictable events unfolding around them. That’s why they are the key to the future.

What makes APIs so powerful?

There are probably a hundred reasons, but here are some of the most important:

They make connecting applications and services to each other almost as simple as “plug and play”.

Because APIs are built to common standards (such as REST and SOAP) and use a common data format (JSON) they are easy for developers to understand and use.

APIs can bridge the gap between legacy systems and new technologies so the two can work together.

They make automation easier, making workflows faster and more efficient.

They help manage security and improve access to data.

Because they are purely intermediaries that carry requests and return data, they help maintain independence between applications.

They make it easy to personalise the user experience.

They open up new possibilities to make use of existing data. For example, you can make better use of your data by plugging in more powerful business intelligence module than the one provided with your core system.

Most importantly perhaps, they aid innovation by significantly speeding up the process of new product development.

They can be valuable products in themselves because you can charge partners to use them.

Why are APIs important in banking and finance?

We’ve provided a general overview, but what about the specific applications APIs have in the world of banking and finance?

APIs enable a core banking or lending system to connect to hundreds of other applications and services quickly and securely. These might include:

Other systems   

    • ERP, HR, and accounting systems  
    • In-house applications 
    • Other banks 
    • Point of sale 

Due diligence  

      • Credit scoring 
      • Trust scoring 
      • e-KYC 
      • AML services 

Intermediaries  

    • Field collection apps 
    • Agency banking 

Money management  

    • eWallets 
    • Payment cards 
    • Bill payments 
    • ATMs 

Loan management  

    • Direct loan disbursements 
    • Loan repayment channels 
    • Online loan applications 

Management  

    • Business intelligence, reporting, data visualisation etc. 
    • Sending data to compliance authorities and audit systems 
    • Messaging and communications  
    • Customer marketing 
    • SMS messaging  
    • Messaging channels (Viber, Whatsapp, Facebok.)  
    • Social media 
    • Website forms 
    • Chatbots.

 

Not just APIs but API-first 

Problems can arise when APIs are bolted-on or treated as an afterthought. Web APIs have been around for two decades but it’s only relatively recently that developers have realised the importance of anticipating the use of APIs in products and systems, if not making them fundamental to the design from day one. The philosophy is that the product or service’s reason for existing is to connect – thus, it should be designed API-first.

The Oradian approach to APIs

Oradian’s core banking system was designed to be open and accessible to external services from day one. Rather than try to build and maintain a range of specialist modules and services ourselves, we have always taken the view that the best thing we can do in the interests of our customers is to create a robust, secure, and flexible core banking system with almost limitless interoperability. This gives our clients the freedom to connect to the third-party systems, services, and applications most appropriate to their needs. The choice is theirs.

Oradian’s API is designed to be a robust tool for developers to build and maintain in-house applications and services, reporting tools, and programmatic or automated processes.

Six questions to ask your core banking system provider before you buy 

Here are the big questions your should ask your prospective core banking provider before committing to implementing their system.

1. Check the track-record – which business successes were powered by that API?

Oradian’s was the first banking cloud API to be certified in the Philippines – powering the pioneers like Cantilan Bank and supporting their now-epic digital transformation journey. The experience and lessons that come with this experience cannot be easily matched, and that best practice is translated to all future partnerships. The knowledge must flow.

2. Are APIs available for every aspect of the system?

Some companies only offer APIs to cover the “gaps” in their own offering. In effect, this creates a “walled garden” that prevents you from using third-party apps instead of their own. For example, a CBS provider with its own mobile banking app may not provide the APIs necessary for you to connect to a third-party version to tie you into using theirs.

3. Can you use all the APIs free of charge?

It is quite common for CBS providers to charge you extra for using certain types of API (or per API call) to dissuade you from using third-party applications instead of theirs. Make sure you are not facing unnecessary bills before you commit.

4. Do the APIs adhere to the most common API standards?

For APIs to be understood and used quickly and effectively they should be created to common industry standards. Web APIs like REST and SOAP are the most common. 

5. What API documentation is available?

Are the APIs fully documented? Do they cover everything that can be seen and done through the interface? Some providers may fob you off with example use cases, but these won’t be sufficient to allow your developers to quickly integrate new services and channels. The API should be intuitive and simply  work, unnoticed. Just like plumbing, it works whether or not you’re aware of the pipes within walls. Can your developers focus on the service they are integrating instead of the complexity of the API? 

6. Can you act instantly? Push. Not just pull.

There are quite a few use cases (some of them important, like new potential customer creation), where you want to act at once, to stay relevant to the customer while their attention is there. In these cases, you need to make sure that triggered APIs are available, so your external systems or services are alerted. In important situations you cannot wait for the next pull request, which may be defined hours after the event, to become aware of the change – you need to act on customer expectations at once. Make sure that both push and pull APIs are supported for business-critical use cases and services.

Ready to grow with Oradian’s API?

If you are interested in discovering how Oradian’s cloud-based core banking system can unlock growth for your business, get in touch with one of our business intelligence experts for a free overview of the Oradian system.

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Think bigger. Go further.

Contact Oradian today and talk to a Core Banking expert.

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