Independent Banker - November 2023 - 52

1. COMPOSABLE BANKING
For a long time, an all-in-one solution was the
dream for any bank, whether it was the core
provider or a loan origination system. But as
banks look to serve niche customers or offer
unique experiences, many of these monoliths
have fallen short.
Composable banking products are modular
and powered by open banking and APIs. Call it
composable banking, call it unbundling, call it
plug-n-play-while the industry hasn't agreed on
a singular term, the concept is that a bank can
have best-in-breed solutions, creating its own
bespoke tech stack.
The impact of composable banking on the
consumer experience is apparent. In the podcast
Banking on Composable, fintech influencer
Alex Jimenez says, " In my mind, if we have true
composability, you would have an experience that
is seamless throughout, whether you're doing an
app, whether you're in the browser ... whether
you're applying for an account. ... It all looks and
feels the same. "
As a result of adopting composable banking, the
scrutiny has shifted from " What can an all-in-one
vendor offer? " to " How good are this vendor's
APIs? " Not all APIs are created equally or maturely
developed. It would fall to a bank's technical
administrator to bridge the gaps.
As banks evaluate vendors, they should ask if
the API operates on a closed or open framework.
The vendor should be able to supply API
documentation and provide information about
training or support available to the institution.
During the evaluation process, a bank's internal
team should assess how receptive the vendor is to
integrations with other platforms.
This type of technology also enables banks
to offer new service lines, according to Charles
Potts, ICBA's executive vice president and chief
innovation officer. " The ability to plug a fintech
and all its solutions into the bank's tech stack
and provide [the bank] with the kind of oversight
and capabilities to manage these things? That's
banking-as-a-service as a strategy. "
2. REAL-TIME PAYMENTS
FedNow has been, understandably, top of mind for
many bankers, especially since its initial rollout
started in July of this year. It's an exciting time, as the
U.S. has lagged other parts of the world in offering
real-time payment solutions.
While a consumer or business can only use FedNow
" CONSUMERS
ARE CLEARLY
DEMANDING
MORE CHOICES
WHEN IT COMES
TO PAYMENTS. "
-Piret Loone,
Link Money
if their financial institution participates, it's a " welcome step forward, " according
to Piret Loone, chief business officer and general counsel at Link Money, a payby-bank
platform for merchants. " If FedNow can move towards interoperability
with the robust but not real-time ACH network, perhaps that full range of
payments will become possible in the U.S., " she says.
The implementation of FedNow is fraught with technical challenges, however,
as the business case and cost effectiveness are not fully clear. Service providers
are hesitant about investing resources to create a solution for banks to use
FedNow without knowing the real return on investment. Meanwhile, products
like Zelle and Venmo have cropped up over the years, offering faster payments
and creating a hodgepodge of options, a far cry from a universal solution for
real-time payments.
Real-time payments have even entered the international scene, with EBA
Clearing, The Clearing House and SWIFT announcing the pilot program of the
Immediate Cross-Border Payments (IXB) service. Community banks should
keep an eye on this technology as it progresses so they can potentially offer realtime
international payments to their business customers.
Whether a single solution will emerge or if banks will continue to partner
with fintechs to offer payment options, " consumers are clearly demanding more
choices when it comes to payments, " Loone says.
52 // ICBA Independent Banker // November 2023
Independent Banker - November 2023

Table of Contents for the Digital Edition of Independent Banker - November 2023
