Five Common Fintech Integration Challenges– and Best Practices for Addressing Each One

Over the past few years, my colleagues and I have led numerous successful integration projects, helping fintechs connect to their customers' banking cores. We soon learned that fintech integration projects have their own unique set of challenges and that proactively addressing them greatly increases the likelihood of success. Each week, I’ll dig into one of these challenges and share the best practices that my colleagues and I developed to address them. This week we’ll cover Challenge 1: The Banking Core.

Fintech Integration Requirements

My conversations with fintech customers often start with a focus on the banking core. Typically, fintechs are interested in volume (How many cores can we connect with), time-to-market (How long does each integration take) and scale (Can we handle integration for a continuously growing customer base).

Volume

Fintechs want to onboard as many customers as possible, which means they require the ability to connect with many different banking cores. Typically, they first prioritize the more popular cores (Jack Henry Symitar or Silverlake, Fiserv Premier or DNA, FIS Horizon or IBS) and later some of the smaller or more niche ones. The last thing fintechs want is to lose a prospective customer because they are unable to connect to that customer’s core.

Time-to-Market

Fintechs want to complete the integration and onboarding of each customer as quickly as possible. Any delays in this area, even when fintechs are not at fault, can impact customer satisfaction or lead to churn. There are also revenue ramifications since in many cases, fintechs cannot invoice new customers until the onboarding process is complete.

Scale

As deals increase, fintechs must onboard a growing number of customers efficiently, avoiding schedule delays and quality issues. This can be challenging since fintech engineering teams tend to focus on feature development, not systems integration. As new customer growth increases, fintechs are forced to consider changes to their staffing and operating models.??

To meet these requirements, fintechs need a banking core integration strategy. Building that strategy requires fintechs to understand the technical and process challenges and to develop a plan that addresses each one.

Technical Challenges

Banking core integration poses several technical challenges. While none of these is insurmountable, addressing them for the first time can be frustrating and time consuming.

Interfaces?

Each core vendor offers its own set of interfaces to communicate with the banking core. Some of these are modern and well documented but this does not guarantee that they expose all the required fields from the core. Some vendors require fintechs to use a combination of legacy and modern interfaces to deliver their use cases against the core.?

Connectivity

Depending on where the banking core is deployed (cloud, on-premise, datacenter), fintechs may have to address complex networking issues. Troubleshooting these issues often requires video conference sessions with multiple vendor SMEs working together to identify the root cause.?

Development Environment

Availability of the end customer’s development environment, including a test core, is something that should not be taken for granted. In some cases, the customer’s test core may not be the same version as their production core. In other cases, the customer’s test core may not be available. Depending on their contract with the customer, some core vendors may only allow access to test core data for a limited period.

Data Model Standardization

Several organizations are each developing their own canonical data model for exchanging information among systems. The more common ones include FDX, BIAN, CUFX, and ISO20022. Because there is no clear winner in this race yet, fintechs may need the ability to understand and map to more than one of them. This requires understanding the features and gaps of each.

Banking Core Process Challenges

Banking core integration also comes with numerous process challenges. Most of these tend to sandbag the schedule and are often overlooked during the initial planning stage.?

Legal and Administrative Requirements?

The core vendor often requires legal reviews and agreements including NDAs. Sometimes this process can be executed in a few weeks and sometimes it can take several months. One core vendor once required me to sign two NDAs and to go through a series of review sessions with different internal teams before giving my organization permission to work on our customer’s banking core. That process took three months.

Environment Setup

In some cases, fintechs may integrate with a customer that is setting up a test core for the very first time. With some core vendors, this can take several months, especially where VPN connectivity is involved. Although it may not be possible to change the core vendor’s provisioning time, this can be addressed with flexible planning that can include developing against mock services in lieu of the test core.?

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Access to Interfaces and Documentation

Accessing the core vendor’s interfaces and documentation should ideally be quick and straightforward, but this is not always the case. Some core vendors require that you first be granted allowed onto their network from which you can then access documentation and interfaces. Gaining access to this information typically requires several meetings with the core vendor.

Review and Certification

In some situations, the banking core vendor will require the ability to review and certify third party integrations to the core. Typically, this occurs when fintechs or their third-party integrators have a partnership agreement with the core vendor. Even then, the core vendor will follow their own schedule, which is unlikely to match the pace preferred by fintechs and their customers.?

Banking Core Integration Best Practices

Banking core integration is often viewed as a line item in fintech onboarding plans, but if approached correctly, it should really be treated as a small program of work. The team that identifies the challenges and puts together a comprehensive plan to address them will succeed. The team that lurches forward only to discover and solve these problems in a piecemeal fashion will frustrate stakeholders and likely fail. Here are recommendations for fintechs to proactively address these issues:

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Preparation

1. Assign a program lead to manage communications and deliverables, and to organize troubleshooting sessions as needed. This person will frequently be in referee mode, especially on troubleshooting calls with multiple vendor SMEs.
2. Identify all the required organizations, teams, and SMEs including the vendors of all involved systems, IT, and business stakeholders.
3. Prior to the project start, send out a questionnaire to obtain as much information as possible about things such as test core availability, where the core is deployed, SME identities and contact information.
4. Set up a kickoff meeting with all stakeholders to align on information, logistics, meeting participation, and other activities.

Execution

1. Publish and regularly review a plan that includes all key stakeholders, SMEs, and clearly defines roles and responsibilities.
2. Hold regular standup meetings to monitor progress and address blocking issues promptly.
3. Look for opportunities to run multiple parallel projects at different stages so that you are not held hostage by some of the core vendor’s delays.
4. Plan on the first integration being frustrating and time consuming and set reasonable expectations with the client.

Scaling

1. Document all lessons learned and update operating plans for future banking core integrations.
2. In the process of delivering the first integration, create reusable assets such as APIs, connectors, and accelerators for the fintech and the target core. These can accelerate future integrations.
3. Develop a plan for versioning, updating, and leveraging the reusable assets.

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These practices reduce risk and schedule delays. They also introduce efficiencies to accelerate future banking core integration projects.?

Conclusion

As silly as this sounds, the most useful approach to addressing banking core integration challenges is to embrace the tedium. Account for all the different issues, players, lines of communication and factor them into a small program of work. It may seem like a lot of effort, but it will save time and significantly reduce project risk. Keep in mind that this article addresses only one of the common fintech integration challenges and there are four more to cover. In next week’s article I’ll cover Challenge 2: Data Mapping.