Some banks and insurers are investing billions of dollars to become digital disruptors, and the stakes couldn’t be higher. The 2022 Connectivity Benchmark Report shows that they could lose an average of $7.6 million each due to failed initiatives, which is significantly higher than the average for all industries. This is partly because customer expectations of financial service providers are sky-high after two years of pandemic-era digital interactions. They now expect banks and insurers to provide the same kind of intuitive and seamless experiences they get from their mobile phone, games and social media.
Integration is essential for financial service providers to be ready to meet these expectations. The ability to easily connect apps, data, and devices to drive automation and create enhanced user experiences will increasingly mean the difference between success and failure.
Connecting a digital world
Integration is critical to the success of any digital delivery project, whether developing new mobile banking capabilities or improving insurance fraud detection functionality for internal teams. It improves the customer and employee experience and unlocks data silos so banking and insurance executives can make better business decisions. Those who have integrated user experiences seamlessly benefit from increased customer engagement, better visibility into operations, accelerated innovation, ROI and project delivery, and increased adoption automation.
However, getting a good integration is not easy. On average, financial service providers have 984 applications running in their enterprise, but less than a third are integrated. Nearly three in five global financial institutions say integration is a challenge.
See the inheritance riddle
Part of the reason financial services have resisted digital change for so long is due to the sheer amount of legacy computing in the industry. This can make it difficult to migrate applications to the cloud and integrate applications and data into traditional silos. It’s not just legacy infrastructure that’s proving to be a stubborn barrier to change. Many IT departments continue to rely on custom point-to-point integrations.
This custom code is just about manageable when there are two or three systems to integrate, but not for the multitude of connections between the large number of applications that modern digital banking and insurance experiences demand. Point-to-point may have worked in the past, but it has become far too complex, time-consuming, and expensive to deploy and maintain in today’s cloud-first world. The truth is, IT could and should prioritize other things that drive greater value. Teams are inundated with requests to support digital innovation projects alongside the operational day-to-day of keeping the lights on.
Adopt a composable business strategy
A composable business strategy has become essential for financial services organizations looking to overcome these hurdles, so they can drive the digital transformation that their customers and employees expect. This strategy can be best supported by API-driven connectivity, which allows teams to create seamless integrations between apps, data, and devices. This helps organizations become more composable, making it relatively easy for users to create new services and experiences. In fact, implementing no- and low-code tools as part of this approach can empower corporate technologists—employees outside of IT—to create their own digital innovations, relieving some of the pressure by the central computer.
Since there is no need to rebuild the same point-to-point integration for each new project, the time to value and costs of digital transformation initiatives can be minimized. By unleashing the creative energy of business technologists in this way, banks and insurers can do much more with their IT teams, freeing them up to devote more time to work with higher added value.
Paving a road to the future
Financial services organizations have made great strides in their efforts to embrace composability. On average, nearly half of their internal software assets and components are now available for developers to reuse. This is leading to the emergence of more mature innovation strategies that allow enterprise technologists to integrate applications and data through APIs.
Composability, enabled by API-driven connectivity, will not only help banks and insurers deliver innovative local services. In an open banking world, it will also allow them to provide seamless connectivity with third-party services and providers, including fintechs. This will be key to winning and retaining customers who are looking for more than traditional banking and insurance products.
The future of the financial services industry is looking increasingly digital. With reusable APIs, financial services companies finally have an effective way to unlock traditional data silos and deliver connected experiences that are fit for the digital world, and they don’t have to break the bank to do so.