Articles

5 Factors to Evaluate Open Banking Readiness in Canada

By Steven Cheung and Rishi Khanna

open banking readiness

Open banking’s first phase is almost upon us. Now more than ever, banks will need to address their digital and core systems if they wish to participate and gain from the new banking regime. The need for seamless digital experiences, especially post Covid, is shaping customers’ expectations from banks and financial institutions too. Roughly $416 billion is up for grabs and if the prediction holds true that open banking adoption will increase by 76% in the next three years, then incumbents should begin preparing themselves without delay.  

What is Open Banking? 

Open banking is a way for financial services customers to securely share their financial data with other financial institutions and third-party providers using APIs governed and regulated by universally accepted protocols. Open banking exists in several countries around the world including the UK, Australia, Brazil, and Singapore.  

The Benefits of Open Banking 

Open banking is pushing banks to innovate and play nice with Fintechs. In the UK, where open banking launched shortly before COVD-19, the use of Fintech applications for money management rose by 20% for adults and 50% for young adults. Banks, as trusted custodians of customers’ data, can take advantage of the new Fintech technologies that have sprung up as a result of open banking to deepen customer relationships and retain them by providing valuable insights on their personal or commercial finances instead of just facilitating transactions.  

5 Factors to Assess Open Banking Readiness in Canada 

The first phase of open banking in Canada will begin in January 2023. Many banks and credit unions are in the midst of preparing themselves for open banking. But just how ready are they? 

 Here are 5 Factors recommended by Blanc Labs to evaluate if you are ready for open banking: 

Factor 1: Your core and digital banking systems are up to date 

Your financial institution’s core and digital banking systems are scalable, compatible with other new technologies. You have web-banking and mobile banking platforms for retail and commercial customers. Most processes are automated, minimizing manual intervention. The core banking and digital channel systems are cloud-native 

Factor 2: You have identified business use cases for open banking 

You have identified use cases for open banking at your institution and you would now like to invest in an API-led ecosystem to monetize your data. Open banking use cases could include Account Aggregation, BNPL (Buy Now Pay Later), and Tax preparation.  

Factor 3: Your organization is united in reaching its transformation goals 

You have a non-traditional approach to growth and view open banking as a strategic imperative towards creating new lines of revenue for your business. As such, you have budgets dedicated to open banking efforts. You are looking at ways to improve how to use your data through TPPs (third-party providers) to create relationships with other financial institutions and non-banking entities and turn them into new offerings for your customers.  

Factor 4: Your API-ecosystem is mature 

Your organization has been creating APIs for internal and external consumption for some years. There is a standardization and documentation around maintenance, governance, security, and management of APIs. There is visibility over the entire API catalogue and tooling to track and monitor API performance. You participate in agile data partnerships with Fintechs, which means your onboarding processes are thorough, but quick.  

Factor 5: You can operationalize APIs and use them as products 

That leads us to the final step. Your organization can support third-party use, both in terms of system bandwidth as well as security. Your systems can take high traffic load. You are primed to use API-as-a-Product.  

Do you have an Open Banking strategy? 

Still unsure? Apart from readying the underlying enabling technology considerations, Open Banking is fundamentally a business decision and a discussion about how to best compete and win in the new banking environment.  Here is a handy Digital Maturity Assessment from Axway that can help you figure out what stage you are at and what to do next. Blanc Labs in partnership with Axway offers an Open Banking Strategy Workshop that can help you: 

  1. Define your financial institution’s goals for growth 
  2. Analyze the current state of your organization and what you need to meet your long-term goals 
  3. Identify challenges that you need to beat to ensure you can take full advantage of open banking 
  4. Zone in on use cases that will give you the biggest ROIs and the fastest time to value 

Book an Open Banking Strategy Workshop with Blanc Labs to learn more.

Articles

Open Banking in Canada: How Banks and Customers Can Benefit

By Bob Paajanen & Steven Chung

Open banking benefits Canada

Exactly a year ago, the Department of Finance released the final report from the Advisory Committee on Open Banking. It set an ambitious 18-month roadmap for Open Banking implementation in Canada. With 2023 just a few months away, it is crucial that financial institutions understand the advantages of open banking and the possibilities it can bring, not just for themselves but also for their customers. 

What is Open Banking? 

Simply put, Open Banking is a way for business owners and customers to share their data with their financial institution (and connected third-party providers or TPP) securely using APIs governed and regulated by universally accepted protocols. Customers will have full control over how much and with whom they would like to share this data. They will also have a unified view of all their balances, credit cards, mortgages, investments, and any financial transactions across all banking entities. For this reason, open banking is also sometimes referred to as “consumer-permissioned data sharing” or open finance.   

Open banking started in 2016 with European governments pushing for more open financial data and laying the foundations for banking evolution. The EU’s second Payment Services Directive (PSD2) was a powerful legislation that made an impact on the UK’s Competition & Market Authority (CMA) which mandated that nine of the country’s largest banks develop an “open banking standard” and enable customers to share data with Fintechs and third parties. 

Open banking is now present in several parts of the world, including Australia, Brazil, India, and South Korea, where it is government-led, and in countries like China and the US, where it is primarily market-led. 

Data Sharing in Open Banking  

Before open banking, banks would share data with third-party providers (TPP) or applications using a process called ‘screen scraping’, where data is taken from one app through user details, copied and pasted for another purpose. A good example of this might be a typical finance aggregator app that sends a bot to the bank’s website on behalf of the customer and uses the consumer’s bank login and password to access all their financial information. About 3.5 to 4 million Canadians currently use apps that employ screen scraping. Until now, these TPPs did not have a formal relationship with banks and had access to more information than was necessary. Banks often were unaware of which data was scraped, yet they would be accountable if and when there were data breaches. 

 With new regulations around data sharing, banks will now share only relevant data with TPPs, with the customer’s consent, through APIs or application programming interfaces. Customers will no longer have to share their banking credentials with the TPP. Thanks to this change, many Fintechs that offer open API-led data-sharing networks have come to the fore. 

 As we move closer to 2023, several incumbents and challenger banks are partnering with data aggregators that provide API-led data-sharing networks, which will allow customers to securely share their data with several Fintech applications and provide them with financial insights in real time. Recent examples include EQ Bank’s partnership with Flinks, CIBC’s participation in the MX network and RBC’s partnership with the Plaid and Yodlee networks. 

Why is this happening?  An example will illustrate the opportunity and upside for industry participants. When a customer or their Fintech requests data from multiple financial institutions, aggregators like the entities named above will be able to monetize and sell via subscription the data to each financial institution. This can generate insights around where customers are at risk, or have relationships with other financial institutions, even though the details will be masked.  Better customer profiling can be driven from empirical data through this data sharing model. 

Open Banking and Digital Transformation 

Nearly every, if not all, industries are going through a digital transformation. Long before open banking, many Fintechs had begun unbundling financial services. This trend has only accelerated thanks to open banking. In Europe, for example, TPPs grew from 100 to 450 in between 2019 and 2021. Financial services are now being restructured around “jobs to be done” rather than just products, creating better experiences and value for customers. Open banking will lead to two major outcomes when it comes to data: Interoperability and Automation. By making financial data interoperable, new customer value propositions could be created that offer better access and user convenience thereby creating new revenue streams for the bank. Once customers get a clear and unified view of their financial position, automation rules could take over to help with better decision-making to manage daily finances. This will make it possible for banks to cross-sell products and services without the customer ever leaving the bank’s ecosystem.   

How Open Banking Benefits Financial Institutions 

It is obvious to see the customer benefits of open banking. But what about financial institutions? One of the major reasons why open banking is seen as a catalyst by many governments and markets, is that it will boost growth and increase economic efficiency. Onereportfrom McKinsey estimates that the adoption of open banking could result in “1 to 1.5 percent of GDP in 2030 in the European Union, the United Kingdom, and the United States, to as much as 4 to 5 percent in India.” Another study reveals that $416 billion in revenue is up for grabs for those financial institutions that are agile enough to jump in on the opportunity. 

Hyper-targeting and faster onboarding 

A more holistic view of an individual or SMB’s finances means that banks too can make more customized offerings to their customer. Open data sharing will also make it easier and faster for customers to switch accounts, purchase new products or get approved for lines of credit. 

Reduced operational costs  

A lot of data remains in physical documents and disparate digitized sources. An open financial data system will ensure that the data is held digitally in a centralized location and make it easier for banks to adopt automation methods, thereby cutting operational costs. This is especially true for mortgage underwriting, where intelligent data processing and management can save between $7,000-9,000 per mortgage application. Here are more reasons banks can benefit from automating data intake and processing. 

Better security 

Fraud accounts for $4.5 trillion per year, which is equal to about 5% of global corporate revenue. Open banking may introduce a single-use digital token system compared to screen scraping, which is risky and open to misuse. Bad actors will have little to no access to customers’ login information during transactions, thereby reducing the risk of data breaches. Data sharing in real-time, could also provide a better view of suspicious activities and build predictive models to mitigate fraud. 

Lead Generation 

Banks acquire information from TPPs, such as credit bureaus, about potential customers during lead generation or mortgage origination. In the US, for example, nearly 50% of loan originators depend on third parties for information related to credit, KYC, and property valuation, costing banks up to $80 per application. Open data sharing enabled by APIs could potentially reduce the cost of acquiring this information and make it available securely to more financial institutions. 

Are you ready for open banking? 

Digital transformation has changed the way banks engage with their customers. With open banking, we are at the pivotal moment where customers can choose the services and products that work best for them, while banks and FintTechs can come up with innovative new ways to engage with them. Opening up banking systems can be a daunting change for banks that have operated through a linear chain thus far. Blanc Labs, in partnership with Axway Open Banking, offers a step-by-step approach for banks to: 

  • Build on existing infrastructure to reach their open banking goals faster 
  • Unlock the potential of their existing data to create new business opportunities 
  • Create a security layer for identification and consent to comply with the latest open banking standards
  • Discover, Manage, govern, market and monetize their APIs 

 

Book a demo or discovery sessionwith Blanc Labs to learn about the impact of our Open Banking solutions.  

 

Articles

Transforming a Bank’s Value Network with Automation

By Abhijit Chakarvarty

Michael Porter’s value chain has been one of the top seminal business management ideas that saw business operations with through a new lens. Just like the value chain resulted in concepts like value creation and value pricing leading to phenomenal growth in global business scale and operations in the last 50 years, we are now seeing a similar scenario in the financial services industry with intelligent automation.  

At the turn of the century, we saw a new concept emerge that resulted in changing the business dynamics in the Y2K. This new business concept came to be known as value network, a series of interactions between individuals, entities, organizations, departments, and systems that collectively work towards benefitting the entire group or ecosystem. This new concept had an astounding impact on how businesses and markets operated and paved the course of today’s business ecosystem. For instance, the rise of Apple and its ecosystem can be attributed to this shift.  

A similar shift is also taking place in the financial services industry, where the digitization, embedment, and now decentralization of the payments ecosystem with the commercialization of blockchain, cryptocurrencies, procure to pay (P2P) lending are being touted as the next big thing. 

Given the pervasive technical and innovative initiatives that are emerging at breakneck speed, it is a necessity necessary to keep transforming and innovating. This is especially relevant for the financial services industry which have millennials as customers and will soon begin catering to GenZ.

To digitally transform a bank’s value network let’s start by stating the three core areas of a bank’s value network namely, network promotion & contract management, service provisioning & billing, and platform operations. 

With a two-sided value network, the bank fundamentally connects a borrower with a depositor and thus, becomes the enabler of value creation for such a network. In doing so, a bank delivers core banking and back-office operations, payments and lending functions, and risk and treasury management activities.  

For each of these areas, hundreds of functions and duties must be seamlessly executed with precision. Today, the increase in business volumes and scale of operations has led to bankers asking, “What if these complex and time-consuming operations can be boosted with robots (bots) assisting humans to accelerate speed, increase productivity, and assure the precision of key banking functions?”  

Automation Banking Benefits

Some of the key operational areas where bots can and, in many cases, are assisting humans to realize the true potential of an enterprise are customer service, compliance accounts payable, credit card processing, mortgage processing, fraud detection, know your customer (KYC) process, general ledger, report automation and account closure process. 

Automation Process heatmap

By embracing bots, banks can improve the customer experience while reducing costs and improving efficiency. Increased automation combined with more efficient processes makes the day-to-day easier for teams and individual contributors as they will spend less time on tedious manual work, and more time on profitable projects. Let humans contribute to high-value innovation, and robots help in maintaining and running operations to ensure an efficient and effective enterprise. To realize the true value of bots, and for a bank to embark on its digital transformation journey, the right approach, executive sponsor, business alignment, process discovery & design, pilot, roadmap, and a center of excellence (CoE) is essential to succeed. By using tactics such as data alignment, problem framing, road mapping, and piloting new robots, a bank will be well poised to reach its automation goals.

Blanc Labs has deep industry knowledge and proven experience working with leading banks to gain efficiencies through intelligent automation solutions. We take a holistic approach, helping financial services companies build the necessary foundation and setting them up for long-term success. 

Book a consultation with Blanc Labs to discover the impact of our Intelligent Automation solution. 

 

Articles

Open Banking API Challenges: 4 Areas That Need Intervention

By Steven Chung and Bob Paajanen

woman solving api integration challenges

As financial institutions find their way into the digital world, they face competition from several non-bank forces, including FinTechs and Big Tech companies like Apple, Google, and Amazon. FinTechs and Big Tech have begun rewriting the rules for the finance industry creating new ways of banking and new revenue streams. By offering speed, innovation, and unbundled financial services, digital non-banking entities are luring away customers from banks and credit unions. Open banking promises financial institutions an entry into the changing banking ecosystem by tapping into third-party application programming interfaces (APIs). But without the right strategy, banks may find themselves saddled with high costs, low time to value, vulnerable data systems, and no ROI to show.  

API Challenges 

As API adoption grows, so does the concern around how these APIs will be built or bought; how they will be managed; and the security and privacy risks that they present.  

API Standardization and Documentation 

The biggest concern around API adoption is standardization with more than 52% of organizations finding it a challenge. Unfortunately, there is no universal identity management framework which means that companies must rely on their developers to build their own management systems. Without proper documentation or style guides, different teams of developers within the organization may come up with varying standards for how the APIs are built and consumed, leading to issues with integration and management. The ‘State of Software Quality: API 2021’ study by SmartBear found that 54% of respondents pegged “accurate and detailed documentation as the second most important characteristic they needed in an API as an API consumer, ease of use being the topmost. Yet, close to 40% of the respondents did not use API management software or were using an in-house API management tool.  

API Security  

As banks use more APIs to enable digital businesses and provide web and mobile experiences to customers, the chances of security breaches also go up. There have been several incidents of API attacks and data leaks this year alone. API security is made worse by the fact that many organizations lack an inventory of the APIs they create or use from third parties. Research firm Gartner found that the common theme among many of the API breaches was that “the breached organization didn’t know about their unsecured API until it was too late.” Sadly, there is no tool that will automatically discover vulnerabilities in the APIs. Implementing API threat protection and access control will require endpoint security (processes, infrastructure, and protocols). Without an API management platform in place, this will present further challenges.  

“By 2022, API abuses will move from an infrequent to the most-frequent attack vector, resulting in data breaches for enterprise web applications.”
Gartner (2021)

API Governance standards and privacy regulations 

Government-dictated compliance frameworks around APIs are still some time away for Canadian financial institutions. This means that developers at banks and credit unions must rely on varying standards, including security standards, when it comes to how API integrations will work and be used. Without governance standards, financial institutions run the risk of exposing themselves to fraudulent third parties and exposing customer information in ways that could be used against their interests.  

API Reliability & Performance 

To support new functionalities and user experiences, developers in financial institutions are relying more and more on third-party APIs, APIs from business partners, and from other business units within the enterprise. Many of these APIs are licensed from providers that also look after their daily operations. Due to the composite nature of these applications, an outage with one third-party API can impact any application that is using that API. As of April 2022, there were close to 7.8 million failed API calls in the UK according to Open Banking Implementation Entity (OBIE). The financial entities with the most failed calls are the big banks including Barclays, Lloyds, and HSBC. Frequent API errors create a negative impact on customer experience and may lead to discontinued product use.  

Is your bank ready to adopt open banking? 

API integrations are a necessity as we move towards an open banking system. Financial institutions must have a clear strategy on how they want to implement, govern, monetize, and market APIs to ensure a frictionless customer experience and better business results.  

Blanc Labs has partnered with Axway to provide specialized solutions that make API integrations and management more efficient and cost-effective. Benefits of our unified API platform include:   

  1. Increased productivity, as developers are easily able to find and repurpose APIs instead of duplicating efforts or wasting time searching for them.   
  2. Less technical complexity by unifying and simplifying API services across the organization  
  3. Better security through a unified view of all APIs  
  4. Faster upgrades of legacy systems through an API-first layer allowing you to add new services more easily  
  5. More robust governance through centralized documentation that multiple teams of developers can reference 

Book a demo or discovery session with Blanc Labs to learn about the impact of our API solutions for banking. 

 

Articles

Are your APIs causing more pain points instead of solving them?

By Steven Chung and Bob Paajanen

Now, more than ever, banks are looking at ways to modernize their core technology to meet customer demands for speed, personalization, and seamless digital experiences. For the banks, a large part of that involves securely exposing customer data to third-party systems and consuming data from them. A simple example of this is using your bank credit card to pay with an app such as Google Pay or Apple Pay. For this data exchange to take place, banks build their own application programming interfaces (APIs) or use third-party APIs to interact with other systems. From a digital transformation viewpoint, APIs are indispensable in making banking services more open.

A study on APIs in banking by McKinsey found that nearly 70% of the surveyed banks planned to double the number of internal and third-party APIs and triple the use of public APIs. However, not all API integrations are successful. Close to 40% of the banks mentioned above did not have an API strategy or were still evaluating APIs. Mismanagement of APIs only increases operational issues, decreases productivity, pulls up costs, and delivers incremental results at best. Here we explore five API integration challenges and how to overcome them.

API Integration Challenges

Put simply, APIs are supposed to make it easy for disparate systems to work together. But poor integration can have the opposite effect, leading to silos, duplication of efforts, and rising costs. Some of the API integration challenges include:

  1. Technological Complexity
  2. High Costs
  3. Security Risks
  4. Time Consumption
  5. Varying systems

Technological Complexity

API integration is not an easy process. In fact, of all the digital transformation initiatives, API integration may be the most daunting. The reason for this is that integrating APIs requires an overhaul of the bank’s core systems. Understandably, many banks and credit unions are reluctant to change their core systems in one go as seen in the chart below. Yet, 75% of banks state that the number one reason for focusing their corporate banking strategy on APIs is “improving internal corporate banking processes, workflows and product management.”

Intention to replace core systems

To carefully integrate APIs while upgrading core systems at a pace that is suited to the bank requires a team of experts including highly skilled developers that come with a heavy price tag.

High Costs

Hiring a team of experts to execute APIs is only one part of the cost of integrating APIs. The question for many financial institutions is one of build or buy as this requires significant financial resources, a dependable developer ecosystem, as well as a strategy to monetize these APIs so current costs may be justified. Building a single API can cost upwards of $10,000 (as of 2020) depending on the complexity of the integration and the times it takes developers to build it. Buying APIs may come at a lower cost. Either way, there is no getting around the expense of building APIs and integrating them with core systems.

Security Risks

In Canada, the number of stolen records went up by 4,379% between 2015 and 2020. A data breach in Canada costs approximately $6.35M CAD. The use of APIs is reliant on web-based applications, which means that they are more open to threats from hackers and ransomware. Add to this the fact that a data breach can severely damage the reputation of an organization. API integration projects require hiring a team of security experts as well as updated security protocols.

Time Consumption

Setting up an API connection and integration module can take anywhere from a few weeks to months. This is the time when the development team will learn the logic and architecture of your platform and work to reduce bugs, among other things. Financial institutions that choose the wrong API solution may find that they are losing out to the competition by coming in last.

Varying systems

Within APIs and API systems, there are all kinds of architectures and software. Every system has its own logic and therefore each integration has its unique challenges. With every new system that developers work with, they need time and expertise to integrate APIs with those systems. Therefore, with multiple integrations, the process does not get faster and only becomes more complex

How to overcome API integration challenges

API integrations are a necessity as we move towards an open banking system. Financial institutions must have a clear strategy on how they want to implement, govern, monetize and market APIs to avoid high costs, duplications, and incremental gains.

Blanc Labs has partnered with Axway to provide specialized solutions that make API integrations more efficient and cost effective. Benefits of our unified API platform include:

  1. Increased productivity, as developers are easily able to find and repurpose APIs instead of duplicating efforts or wasting time searching for them.
  2. Less technical complexity by unifying and simplifying API services across the organization
  3. Better security through a unified view of all APIs
  4. Faster upgrades of legacy systems through an API-first layer allowing you to add new services more easily
  5. More robust governance through centralized documentation that multiple teams of developers can reference

Book a demo or discovery session with Blanc Labs to learn about the impact of our API solutions for banking.

Articles

Three Reasons Financial Institutions Are Losing Out to FinTechs

…And How to Keep Up with Digital Natives 

by Bob Paajanen and Charles Payne

Reasons why Banks and Losing Out to Fintechs

The way we bank has changed forever. While FinTechs have the latest technology innovations, what they don’t have is decades-worth of relationships with customers and large swaths of Big Data. Financial institutions need to recognize this advantage, leverage their data, streamline processes, and thereby empower their relationship managers if they want to compete with their new-age rivals.  

Mismanagement of Data 

Most financial institutions have multiple customer-facing systems that operate in their own silos. As many as 50% of banks and credit unions state that they have trouble accessing their internal data. Without a single unified view of their customer, banks and credit unions are unable to collect, process, or indeed deploy insights that will enable them to cross-sell products and services to their customers. 

The services gap left by financial institutions is especially felt in commercial banking where FinTechs are sweeping up SMBs with targeted products and quicker access to funds. A prominent example of this trend is Shopify, which started out as an e-commerce platform, but is now the tenth-largest provider of financial services to SMBs. Another example is Stripe, which has created an end-to-end lending API (application program interface) as its next offer to SMBs. 

Paper-heavy processes, and disparate data management systems are some of the major causes of this issue. As the finance industry moves toward open banking, it is imperative that financial institutions unlock the value of their data and translate it into actionable insights so they can improve their languishing businesses.  

why financial institutions are losing out to fintechs
Source: 11:FS ‘Fintech filling services gaps’ Designing digital financial services that work for US SMBs 

Lack of Efficiency 

A 2019 Gartner report estimated that process automation, including document processing, could save financial institutions 25,000 hours of avoidable work per year. With advances in technology in the last three years, it is not hard to imagine that this number may have gone up even further.  

Most of the productivity loss mentioned above has been attributed to human error. This is hardly surprising when many financial institutions continue to use paper-heavy loan origination models. Without automation, document processing is rife with efficiency and security issues including document mishandling, collaboration on email (generating multiple copies of the same document), versioning issues, loss of time to find the documents when required, a lack of compliance, and a lack of remote access. 

Since the pandemic, consumer expectations have changed dramatically. Close to 60% of customers today are open to completing their mortgage applications entirely online without support on the phone or in person. Even more pressing than the platform, is the need for speed, with customer satisfaction falling 15 percentage points for approvals that take longer than 10 days.  

With unprecedented demand for mortgages, financial institutions must speed up intake, underwriting and decisioning processes faster if they want to keep the customer’s business. 

Costs  

Inefficient loan origination processes lead to rising costs. On average, loan origination costs $7-9k per application. That is over and above the cost of productivity loss, estimated to be $878,000 (for 25,000 hours lost per year) for a company with a 40-person finance team. This cost is invariably passed on to the customer who may end up paying higher fees and charges compared to what they might pay if they opted for a non-banking entity.  

rising cost of loan origination

The FinTechs Are Coming… And how to slow them down 

As a result of service gaps and inefficiencies, customers from both commercial and retail banking have been veering towards nonbanking entities for loans. 50% of Canadian SMBs in 2021 felt that they couldn’t maintain their growth strategies “due to a lack of capital.” Today, nonbanking entities, account for more than 70% of total originations. By using automated processes and digital interfaces, non-banking entities or FinTechs are 25% cheaper than the industry average and can deliver a decision 30% faster compared to other financial entities.  

In the age of Open Banking, it is important that financial institutions update their legacy processes and unlock the potential of their data if they want to survive.  

The automation journey begins with intelligent document processing. Blanc Labs provides a 360-degree IDP (Intelligent Document Processing) solution that can:  

  • Automate workflows for document collection, digitization, and analysis 
  • Replace manual effort through intelligent data capture 
  • Connect with third party data providers for analysis and insights 
  • Analyze document data, provide status alerts, and flag fraudulent entries 
  • Secure documents in a drop box 
  • Deploy on-premises, in the cloud, or as a hybrid model 

Book a demo or discovery session with Blanc Labs to learn about the impact of our IDP solutions for banking.  

 

Articles

4 Ways APIs Can Improve Your Bank

by Bob Paajanen and Steven Chung

Man using banking APIs for transactions

With the urgent need to catch up with FinTechs and appease customers, there is a lot of discussion today around digital transformation in banks and how technology can improve both the customer experience and the bottom line. The word API is thrown around, but few understand the tangible impact of how APIs can improve your bank. In this article, we break down what APIs can do and the areas in which they can significantly change the ways in which banks operate.   

What is an API? 

An API or Application Programming Interface allows disparate systems to communicate with one another. Think of APIs as waiters at a restaurant—they take your order and relay that order to the kitchen. The kitchen prepares your order, and the waiters bring it back to you. The waiter here is a middleman that relays important information that is within the framework of the menu (defining what information should be shared) in a format that is understood by the kitchen (structured data).  

The most common examples of APIs include “login using Facebook” or “login using Google” which use APIs to connect your Fb and Google accounts to a third-party website.  

The use of APIs increases flexibility, increases efficiencies and therefore improves the user experience.

What are banking APIs? 

Banking APIs are specific to banking software. Since the pandemic, the demand for APIs has grown as customers expect real-time 24/7 support across all banking functions. Using APIs can allow the bank’s systems to talk to one another thereby providing the customer with a unified and seamless banking experience.  

The use of banking APIs is up from 35% in 2019 to 47% in 2021 and another 25% of banks and credit unions plan to invest in APIs by 2022.  

Using APIs not only connects legacy systems to one another but gives financial institutions the opportunity to reimagine how their operating model works, what the customer journey should look like and how they would like to interact with customers. Indeed, the use of APIs today, according to PYMNTS, could be compared to getting the “proverbial plumbing in place to enable new digital experiences.” 

Source: Business Insider

APIs and the future of Open Banking

Open banking is a system where banks enable their financial data to be securely accessible to third parties with the use of APIs. Using APIs gives financial institutions access to new banking technologies such as digital lending, online mortgage approvals, digital payments, account opening, engagement tools, analytical tools and a host of other functionalities, while also empowering customers to have more control over their data.  

What can APIs do for your bank?

There are many types of APIs created for a variety of functions. In this article, we will focus on four of the most common types of banking APIs and how they can help in your digital transformation and modernizing efforts.  These are:

  1. Integration
  2. Connectivity
  3. Platform Banking
  4. Innovation

Integration

Banking systems set up even five years ago are now considered legacy systems. Such legacy systems don’t usually communicate well with newer technologies.  Failure to keep up with the consumer or regulatory demands of today may render the bank obsolete. This is where APIs come in. Instead of replacing legacy systems—a time-consuming and expensive process—APIs can help legacy systems communicate with new software at a fraction of the cost and twice the speed. A good example of APIs integrating banking systems would be providing a branch locator (using mapping software like Google Maps) on the bank’s mobile app.  

With advancements in technology and frequently updated regulatory requirements, integrating legacy systems with newer technologies is no longer a choice but a necessity.  

Connectivity 

As services such as personal financial management become more automated across various functions within the bank, there is a growing need for better governance of user data, including customer checking and credit history.  

Because APIs also regulate the information that they share between systems, they can filter out relevant information to a third party without disclosing every detail. They can also time how long the information will be available to a third-party program. For example, credit history may be available for only 30 days.  

APIs available today, especially REST APIs(or web-based APIs), are lightweight, faster, more scalable, and offer real-time connectivity, making them a perfect use case for mobile applications.  

Platform Banking 

Many non-bank businesses such as FinTechs today opt for the banking-as-a-platform strategy, where APIs are used to connect the non-bank business to a bank. With the use of APIs the non-bank business can use the bank’s license and regulatory framework, thereby offering banking services without being banks themselves. This means lower operations costs, which they can pass on to the customer in the form of lower fees and better rates. Banks on the other hand can take advantage of the newer technologies offered by the FinTechs to improve their service offerings without having to build them themselves.  

An example of this is Tangerine Bank, a no-branch “bank” that offers banking services like savings and checking accounts using Scotiabank’s banking license to operate. APIs allow seamless, real-time connectivity for Tangerine customers, allowing them to access their banking information on their mobile app.  

Innovation 

The ability to plug-and-play innovative technologies means that banks can now offer a variety of new products while creating better efficiencies at the back end. Using APIs, banks can circumvent an overhaul of their legacy systems, improving bits and pieces at a time. This will save banks both money and time. APIs also allow banks to integrate products and services in a modular way. This gives them a wider choice of vendors, and with that comes better control of price, quality, and delivery.  

Banks need not always depend on third parties to add on new products and services. If they decide to go their modernization route themselves, they can use APIs to standardize the process and add tools without making drastic changes to the underlying system—something that most banks prefer.  

APIs can also help connect one banking system to another. For example, an API can connect the lending workflow with a customer’s personal banking workflow. This connection can provide better efficiencies, reduce manual work, and improve employee satisfaction. APIs can also integrate automation tools such as end-to-end journal entries, loan document processing, and report creation on top of legacy systems, saving time and cost. A 2019 report by Accenture predicted that banks would see a productivity gain of US$ 59 billion by 2025 thanks to automation. This number is probably higher in the context of the pandemic, which forced banks to automate and modernize their processes even more aggressively.  

Current Challenges with API integration 

While many banking institutions recognize the benefits of APIs, integrating them into the banking system is not without its challenges. This is especially so when you have multiple teams across geographies using a variety of API tools and vendors. This leads to duplication of efforts, further complicates the system and therefore leads to a loss in productivity.  Using the right API platform can take care of these issues while giving the additional benefit of security and governance.  

Integrate APIs in your banking system with Blanc Labs 

APIs offer an exciting future for banks. It is imperative that banks take advantage of new technological products and services and leverage open banking, so they are not left behind in the race with FinTechs and other competitor banks.  

Blanc Labs offers APIs that unify all ledgers and functions so that banks can get a true 360-degree view of their customers and help banks upgrade systems to meet regulatory standards.  

Book a demo or discovery session with Blanc Labs to learn about the impact of our API solutions for banking.  

Articles

Why Banks Need Intelligent Document Processing

By Charles Payne and Donald Geerts 

Why banks need intelligent document processing

In the last two years, we have witnessed a consumer engagement revolution. The pandemic has seen a rush toward digital channels in all facets of life, including the banking industry. The need for instant gratification and round-the-clock support means that lenders must process customer or broker requests faster while balancing security, compliance, and risk management. Data released by the Canada Mortgage and Housing Corporation (CMHC) suggests that in the first half of 2021, the mortgage industry in Canada saw its fastest growth in the last 10 years. Given the rising demand of the market, the “need for speed” in the loan origination and decisioning process is at the top of the list.   

Staying ahead of the competition requires a digital transformation that often begins with intelligent document processing as the first step. Financial institutions must partner with the right intelligent document processing (IDP) solution provider that will deliver both speed and accuracy to meet consumer expectations.  

why banks need intelligent document processing

Tedious and time-consuming processes 

The process of mortgage approval or renewal involves many, many documents. Before a mortgage is even approved, a mobile mortgage lender must collect and organize documents (sometimes handwritten), send them to various personnel in the financial organization to be vetted, and finally return to the customer with a yes or no—a process that can take up days or weeks. If a bank takes too long to respond to a borrower, they may turn to offers from other lenders. Such a situation is easily avoided with the help of intelligent document processing. Once a document is received, the right IDP program can classify it, extract data from the document, and store the data in a way that is accessible around the clock, not just to employees of the lender but to RPA (robotic process automation) processes as well. If additional documents are required, the RPA process can notify the mortgage agent or borrower. If the application is complete, then the RPA can send the data ahead for auto-decisioning. Using IDP in combination with RPA can ensure a quick turnaround on an application without consuming too much time. 

Organizations with no digital document processing reported 10x more at-risk customers and 2x more at-risk revenue compared to other companies. (Forrester, 2020) 

Inability to scale 

One way to address the growing demand for mortgages is to hire, train and retain more employees. However, increasing the size of the team may result in a higher time to value (as new employees will take time to ramp up to desired levels of efficiency) and increased costs too. Lenders can benefit from IDP solutions that may be scaled up quickly with a marginal infrastructure cost.  

Just digitization isn’t enough 

Many lenders today receive applications through mortgage portals. While the first step of digitization of documents is taken care of, banks do not follow through to ensure the proper classification, extraction, and storage of these documents. As a result, an employee must still go through the documents to verify and authenticate their contents to ensure they are adequate for an application. It is no surprise that knowledge workers lose 50% of their time preparing documents and therefore, experience a 21% loss in productivity because of document issues.  

Security and risks 

Worldwide, the digital fraud attempt rate grew by 52.2% in 2021 compared to two years earlier. Banks or financial institutions that do not have intelligent document processing capabilities may be caught off guard or may not be able to respond in time to stop transactions. IDP, on the other hand, can reduce the incidence of fraudulent transactions by assessing large volumes of historical data accurately and in real-time. By identifying the patterns, an automated system can immediately flag a suspicious transaction and stop it if necessary.  

KYC is another area where IDP software can help by minimizing human error. The IDP program can read submitted documents, verify the identity and details of the customer by searching through data repositories and even assign them a risk score, thereby helping the lenders meet regulatory standards.  

Unaligned with consumer demands 

Unsatisfactory products and fees, slow response to problem resolution, and a lack of convenience are some of the top reasons why financial institutions are are losing out to FinTechs and digital-only banks. One of the biggest contributions IDP can make is to automate repetitive manual tasks and free up lenders employees’ time in activities that will increase customer satisfaction—building trust & rapport and enhancing product offerings.  

Automate document processing with Blanc Labs 

There are many reasons why banks need intelligent document processing, and Blanc Labs provides a 360-degree IDP solution that can:  

  • Automate workflows for document collection, digitization and analysis 
  • Replace manual effort through intelligent data capture
  • Connect with third party data providers for analysis and insights 
  • Analyze document data, provide status alerts, and flag fraudulent entries 
  • Secure documents in a drop box 
  • Deploy on premises, in the cloud or as a hybrid model 

 

Book a demo or discovery session with Blanc Labs to learn about the impact of our IDP solutions for banking.  

Articles

Extraction: The Next Step in Intelligent Document Processing  

By Luciano Lera Bossi, Alejandro Nava and Parsa Morsal  

intelligent document processing extraction

One of the starting points of digital transformation, especially for financial institutions, is intelligent document processing or IDP. We previously explored classification as the first step in IDP. In this article, we will explore the next crucial step, extraction.   

What is document extraction?  

Document data extraction is a process of extracting data from structured or unstructured documents and converting them into usable data. It is also called intelligent data capture. With the rapid progress in document imaging technology such as the incorporation of natural language processing (NLP) and optical character recognition (OCR) as well as advanced analytics, we can now enable IT systems to understand the data that was thus far only on paper.  

Powered by machine learning models and NLP, IDP systems can now bring the benefits of AI to document processing. The intelligence and detail offered by IDP systems today can be used for many functions including compliance and fraud. The level of granularity, accuracy, and speed offered by IDP systems today, can hugely impact the scale of digital transformation for your organization.  

Document processing and the banking industry  

The financial industry is no stranger to the benefits of IDP. In a recent study of 200 banks in the US, it was found that 66% of the respondents eliminated the need for manual processes for a typically labor-intensive industry thanks to IDP; and 87% cited accuracy and extraction as the key reasons for incorporating IDP into their systems. Given the emphasis on accuracy and extraction, it is important to understand how intelligent document processing coupled with OCR and NLP can give desired results.

OCR vs IDP

OCR as a document processing technology has been around the longest. OCR is used to extract handwritten or typed text in documents which can then be converted into data. While OCR has been synonymous with data extraction for many years, it is not without its challenges. Without intelligent processing of the data in understanding what the data is for, OCR may give inaccurate results. There can be errors in detecting a text block in an image (error in word detection), there may be errors in interpreting words correctly if there are differences in text alignment or spacing (error in word segmentation) or there may be errors in identifying a character bound in a character image (error in character recognition).   

However, when combined with intelligent processes such as NLP and machine learning analytics, time-intensive processing tasks can be sped up with minimal errors. The biggest differentiator between OCR and IDP is that IDP can also handle documents that may be structured, semi-structured, or unstructured.

Structured Documents  

Structured documents generally focus on collecting information in a precise format, guiding the person who is filling them with precise areas where each piece of data needs to be entered.  These come in a fixed form and are generally called forms. Examples of structured documents include tax forms and credit reports.   

Semi-structured Documents  

Semi-structured documents are documents that do not follow a strict format the way structured forms do and are not bound to specified data fields.  These don’t have a fixed form but follow a common enough format.  They may contain paragraphs as well. Example of semi-structured documents could be employment contracts or gift letters.  

Unstructured Documents  

Unstructured documents are documents in which the information isn’t organized according to a clear, structured model. These files are all easily comprehensible by human beings, yet much more difficult for a robot. Examples of unstructured documents include mortgage commitment statements and municipal tax forms.   

Textual and Visual data extraction in IDP  

The two main aspects that efficient IDP solutions tackle are textual data extraction and visual data extraction. In textual data extraction, the entity extraction technique is applied to recognize text in a document. This is a machine learning approach where the software is exposed to thousands of documents and the machine “learns” to identify information and segregate it based on certain semantic parameters. Entity extraction can involve a variety of tools and techniques including neural networks to visual layout understanding. By using entity extraction methods, you can avoid going down the template route and thereby use the software on various kinds of documents.   

In visual data extraction, IDP solutions can be designed to understand elements such as signatures, tables, checkboxes, logos, etc. Visual data extraction is more complex than textual data extraction as it involves detecting, analyzing, and extracting information from the regions with visual elements accurately while also denoising content that is not relevant. Using machine learning, advanced visual extraction models can also understand the structural relationship of the visual data and its relevance.   

Choosing the right IDP solution that can handle both text and visual elements accurately across varying document types will ensure that there is no need for your back office to comb through documents once again.   

Explore Kapti, our intelligent document processing software to find out how the power of machine learning and automated document workflows can transform your organization’s document processing experience.  

  

Articles

4 Ways to Avoid A Failed Automation Journey 

by Saurabh Bhatia 

4 Ways to Avoid A Failed Automation Journey

In recent years there has been a growing desire among financial institutions to automate processes as they move upstream to meet customer requirements. Before important decisions like loans and underwriting decisions are even made, financial institutions are deploying automation at the start of the process to provide a seamless digital-first experience.  

Research shows that automation is one of the fastest and most efficient ways for financial institutions to acquire, enhance and deliver information, reduce costs and save manual labor. Then why is it that most automation initiatives fail?  

4 Ways to Avoid A Failed Automation Journey 

A survey by EY states that 30-50% of initial RPA projects failed to realize their expected returns. The diagnosis suggests some challenges the enterprises typically face in their automation journey which potentially cause the RPA failure. Here we explore 4 ways in which enterprises can avoid automation journey failures: 

1. Give importance to change management and training 

2. Create automation champions within the organization 

3. Use the right tools to understand what needs to be automated 

4. Keep employee experience at the core of the automation vision 

Let’s dive in! 

Give importance to change management and training 

Automation cannot be successful without proper implementation of change management. Even if automation is a technical matter, it relies heavily on human relations. Intelligent Process Automation (IPA) is different than your typical IT project such as ERP/CRM etc. 

These projects require engagement from business users because, in essence, the role of the very same individual will evolve with the adoption of automation. Organizations that have been successful in their automation journey have put a real emphasis on the training and mobility of their teams when implementing automated processes. One of the most common examples of this is the changes in the target user interface. Any changes to the UI interface of an RPA application or system will most likely halt the automation which can put projects in a critical condition. Therefore, some organizations ask their automation core team to regularly check for changes in the ecosystem of the dependencies (in this case the UI interface) to avoid any failures.  

Create automation champions within the organization  

Automation is here to stay and is evolving rapidly. However, many organizations still see their automation initiatives as a project and not as a journey. Automation today has moved away from being just a technology project and is more about data transparency and technology capability. Most organizations don’t approach automation with the rigor it requires, assuming the business workforce need only attend a few training courses and that they can, without the support of IT, generate enough extensive automation to scale a program. 

IT is a critical partner throughout the transformation process. Their role is to ensure that the system is scalable, reliable, secure, and performs well. To make automation scalable, organizations should have a core team who are experts in the automation space. Successful organizations use such a core team to articulate the business value of automation well and get buy-in from key stakeholders within their organization. The core team articulates the need, advantages, and roll-out plan to each stakeholder before moving ahead with automation. 

Behaviours Driving Intelligent Automation Success & Failure

Use the right tools to understand what needs to be automated

Not all business processes are considered fit for automation. Choosing the wrong pilot process without understanding the needs can become one of the major reasons for failed automation initiatives. The success of any automation program strongly depends on a deep understanding of how processes will get handled on-ground.

Organizations are moving towards discovery tools such as process mining, task mining, and task capture which identify automation and improvement potential in end-to-end business processes and unleash the true value of automation.

You can use “The Three Rs of Automation Discovery”, to guide your approach towards successful discovery and automation implementation.

Keep employee experience at the core of the automation vision

In recent years we have realized that automation is not about replacing human beings but helping them be more efficient and using them for strategic work rather than manual. Automation projects require even more engagement from these individuals (users) to ensure the stability of the automation program.

It is important that organizations have full management support to communicate and reassure their teams that automation is more about reducing boring/repetitive tasks so that they can focus on more interesting and fulfilling work. Think about a contact center agent in a bank who struggles daily with clients because they had to go through 15 or 16 applications to do simple resolutions. They will be better off with an easier interface where they can focus more on the clients rather than swivel chair operations.  Automation can help these contact centers to reshape the experience not only of the customer but also of the team members, which will also lead to better talent retention rate.

The Bottomline

There is no question that Intelligent automation has demonstrated exceptional results, from predicting behavior to streamlining operations. But its implementation needs to be thoughtful, effective, and pragmatic to ensure its long-term success. There are other factors that can cause a project to fail including the lack of testing and not following the best development practices. However, these 4 reasons are primary and should be taken into consideration before starting your automation journey.

Blanc Labs has proven experience working with organizations to identify and implement intelligent automation solutions. We take a holistic approach, helping organizations build the necessary foundation and setting them up for long-term success in a hyper-automation environment.

Book a demo or discovery session with Blanc Labs to discover the impact of our Intelligent Automation solution.

Interested in hearing how we can accelerate your digital transformation?