The Magic 8 Ball might be the easiest fortune-telling device available. You simply ask it a question, shake it, then read its response through the little window.
A standard Magic 8 Ball has 20 possible answers including 10 affirmative answers, five negative answers, and five non-committal answers. If you asked one whether interest rates will come down soon, you’ll likely get “Ask again later” or “Cannot predict now.”
But what if you wanted to know about the direction financial technology is headed? And how you can begin to prepare now?
While consulting a Magic 8 Ball about this might not be the wisest idea, if you think about the mathematical chances that you’ll get one of the 10 affirmative answers, it works in this example if you play along:
- Q: Magic 8 Ball, should I be thinking about how the latest technologies can help me achieve my institution’s short and long-term goals?
- Q: Magic 8 Ball, should I be thinking about open banking and how it can help me grow and scale for the future?
Predicting the precise future of financial technology is challenging due to the rapid pace of innovation, open banking, and evolving market dynamics. However, there are a few things that are certain.
Efficiency Will Never Go Out of Style
As NIM compression continues (despite anyone’s hopeful predictions), increasing operational efficiencies continues to be a top strategic priority for both banks and credit unions. The industry has long been in a state of process improvement - always willing to try new technologies in an effort to make services more efficient. However, more recently, the speed and frequency with which technology continues to emerge has left many struggling to keep up.
While it’s imperative to find those “quick wins” that not only solve for efficiencies today, sustaining and building on those over time has never been more important. But with competing priorities, looming deadlines, and the fast-moving industry landscape, how can you possibly predict what you’ll need five to 10 years from now?
We are at an inflection point where emerging technologies are converging to create a unique opportunity for the financial services industry to get future-ready now.
Digital Transformation Isn’t Slowing Down
The current period of rapid transformation has been driven by technology, regulatory changes, and evolving accountholder expectations, and it’s not slowing down anytime soon. Adaptation to these changes is crucial to remain competitive and effectively meet the needs of accountholders in the digital age.
Digital adoption is no longer a question but a reality: around 73% of the world’s interactions with banks now take place through digital channels.
Traditional financial services are also being turned upside down (for the better!) with open banking. In order to navigate the opportunity open banking brings and realize its full potential, financial institutions must understand the landscape, identify benefits, and address challenges.
Open banking is proliferating financial technology around the world, forcing banks and credit unions to change their business models. Instead of competing directly against fintech and third-party providers, open banking can be leveraged to form strategic partnerships that allow you to compete both effectively and efficiently.
Open Banking Is Now the New Normal
Open banking facilitates and streamlines processes through the sharing of financial information between banks, credit unions, and third-party providers through secure APIs. This sharing of data allows for more transparency, competition, and innovation. For example, in the context of lending, open banking has significant implications and opportunities for both lenders and borrowers, including:
- Increased application speed
- Ease of data validation
- Improved risk assessments
- Greater insights to broaden your accountholder base
- Further automate the underwriting process
How do you position yourself to take advantage of our evolving financial services landscape with limited resources, bandwidth, and talent gaps? How do you decide which options are right for you and when, and find the time to evaluate the right strategy to make a difference in a meaningful timeframe?
According to The Financial Brand:
“The path forward for banks (and credit unions) involves proactively seeking strategic collaborations with promising fintech and neobank partners. This approach allows them to integrate innovative solutions into their existing systems and processes. Doing so bolsters their competitiveness and equips them to better serve customers in an increasingly digital-first landscape. For traditional (institutions), the emergence of neobanks and fintechs may be disruptive, but it also brings new opportunities to reinvent services and reaffirm consumer trust.”
With thousands of fintechs to choose from, this might seem like a daunting task. After all, these solutions must be tried, tested, and vetted. What if your team has limited development resources and technology expertise? This is the biggest obstacle to innovation facing leadership teams today. After all, you can’t buy yourself into being future-ready. Leadership must understand the value of an ecosystem strategy now and get employees ready.
Your Go-Forward Strategy
While the process for focusing on the highest grade fintechs has never been more important, working with a trusted collaborator that understands platform economics and has an open philosophy is key. You should be able to rely on that trusted collaborator to guide you, show you where to go, and to know which technologies best match your business goals. They have the advantage of thinking with a broader lens across the wider ecosystem of fintechs, big techs, and even geographies. And, they should have the best and easiest platform for a fintech to embed into so they’re more accessible to you at scale.
The advantages are endless. Imagine not having to manage multiple, complex systems that offer too much – or too little – of what you and your accountholders need. Consider the possibilities:
- What if you could tailor your offerings based on your business strategy, add or change services as new opportunities emerge, and deliver a modern experience for both your accountholders and staff?
- What if ease-of-use, efficiency, and speed could replace tedium and error for your employees, so that margins can be expanded instead of eroded?
- What if traditional and alternative data were available in real time to power smarter, more successful decisions that could help you reduce fraud, minimize risk, and grow your brand?
- And what if an environment existed that enabled you to create, protect, and enhance relationships by empowering the best of what humans can do with current and future technology?
These are just a small glimpse of the opportunities open banking and technology modernization are bringing to the table.
For instance, today Jack Henry™ has more than 900 third-party integrations in our ecosystem. We are building a versatile lineup of next-generation solutions that support open integration and a real-time data strategy. We are also vetting the fintech universe for you – narrowing the field from thousands to hundreds, so you can focus on your go-forward strategy and continue to grow, evolve, and thrive in an everchanging landscape.
Is the future bright? Signs point to yes! You can also talk to an open banking expert today to help position your institution for growth and ensure you are future-ready.
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