Commercial financial institutions (FIs) have come to rely on flexible digital banking as closures and social distancing accelerated existing trends. Sixty percent of decision-makers at FIs in the United Kingdom say their organizations have incorporated at least one new digital technology in the past year, for example. Across the industry and the globe, embedded finance products and services are gaining prominence. These solutions can remove frictions and manual interventions from workflows, improve the commercial banking customer experience, reduce transaction risk and make customer workflows more efficient.
Creating and maintaining such products can be cost-prohibitive for FIs, however, especially if they fail to leverage application programming interfaces (APIs). Many commercial banks now deploy APIs internally to share data among their own systems, significantly increasing their functionality. Their usefulness does not stop there, as partnerships and collaborations with FinTechs can further expand the functionality FIs can present to customers while also helping them save resources.
In the February edition of the Next-Gen Commercial Banking Tracker®, PYMNTS explores how banks and FinTechs can use APIs to innovate in commercial banking.
Around the Commercial Banking Space
Open finance is transforming how FIs and businesses approach collaboration with FinTechs and the development of core partnerships. In addition to cost savings, which 57% of legacy FIs expect to reap from FinTech partnerships, 48% also see collaboration as essential for innovation. Meanwhile, 52% of legacy FIs see the potential for developing disruptive technologies, while 25% expect to be able to make their service offerings more attractive to potential customers by harnessing such technologies.
Payments processing is another area where partnerships with FinTechs can prove especially advantageous for FIs. About one-third of FIs generate at least half of their profits via payments processing, and 86% of large banks say they realize at least 30% of their profits via payments processing. Sixty-five percent of banks said that open APIs are central to their plans for payments modernization, while 48% said that legacy systems are not up to the challenges of the rapidly changing payments landscape for either commercial or noncommercial customers. This indicates that partnerships with FinTechs can help them keep their payments processing applications up to date and safeguard a critical revenue stream.
For more on these stories and other commercial banking developments, check out the Tracker’s News and Trends section.
TD Bank on Facilitating Commercial Banking With APIs and FinTech Partnerships
Commercial banks are already broadly deploying APIs both internally and externally to simplify systems integration and ensure that clients have the data they need when and where they need it. By looking for client pain points, these FIs can determine the best path to navigate with deployment of future APIs.
In this month’s Feature Story, Paul Margarites, head of U.S. commercial digital platforms and FinTech partnerships at TD Bank, talks about how the FI uses APIs to improve clients’ experiences and how partnering with FinTechs can help.
PYMNTS Intelligence: Enabling Commercial Banking With APIs and FinTech Partnerships
The pandemic has pushed every industry toward greater reliance on digital solutions to keep up with rapid changes in the economy and accommodate a remote workforce. As the importance of various technological solutions gains prominence, so does the need to enable easy communication and data sharing between disparate systems. APIs have played a significant role in ensuring that commercial banks’ internal systems can work together and more easily share data with their clients. FIs can use APIs to help commercial banking customers stay connected with their banking data in the way that works best for them.
This month’s PYMNTS Intelligence looks at the role APIs are playing in the present and future of commercial banking by streamlining processes and minimizing manual interventions.
About the Tracker
The Next-Gen Commercial Banking Tracker®, a PYMNTS and FISPAN collaboration, examines the latest trends and developments shaping the commercial banking space and how APIs can improve the commercial banking experience while also adding security and efficiency.