Daily Deposit 2.17.2023

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content hotter than the inside of a Totinos pizza roll…

I dug into a 20 page American Bankers Association report on Middleware Solutions so you don’t have to. buckle up

Exploring Banking Middleware Solutions

The ability of community banks to deliver innovative products and services is largely dependent on the state of their core banking platforms. Bluntly, legacy cores like FIS, Fiserv, and Jack Henry suck for this.

Middleware platforms are the industry’s best practice for connecting applications, and they are crucial in reducing reliance on legacy cores and making future conversions easier.

Analysts estimate that over two in five U.S. banks still run their core banking processes on legacy back-end systems designed almost four decades ago. This stuff is freaking archaic, but times be a changing…

Adding a middleware layer helps smaller institutions modernize the foundational systems their banks rely on without changing the legacy core systems, limiting risk potential and cost. Leveraging middleware in the banking tech stack can give rise to three key benefits:

1) reducing reliance on a legacy core to deliver products faster

2) building a single source of truth for customer data

3) fostering partnerships with fintech companies.

Integrating with a middleware layer will better prep a bank for the eventual migration away from the legacy core. Next Gen cores are coming, and when banks want to convert cores, an in-place middleware will make this dramatically easier. The new core can connect to the middleware while the legacy core is in use, and the conversion can happen seamlessly once testing is complete.

A single source of truth for customer data is possible when the middleware is able to unify disparate sources of customer and internal data. This centralized data repository allows customers to experience real-time updates across all back-office apps.

The biggie benefit for community banking is fostering fintech partnerships. Banks can explore new revenue streams, like BaaS, through these partnerships. Middleware makes these API connections with fintechs easy peasy.

The optimal choice for a given bank is driven by the current state of its tech stack, business objectives, and unique constraints on its operating model, including organizational risk tolerance. If a bank decides to go the middleware route, they have options. These include Unit, Aion Bank, and Synctera to name a few.

The landscape is rapidly changing. Banks will need to assess their risk appetite against the more established in the space, like Unit, or go the road less traveled and grow organically with newer and non-battle tested provider. I predict those banks that do this right will establish a majority of the market in the next 3-5 years. Sharpen your blades, it's time to go to war!

LULZ

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reply with a Cold Stone bowl score… did you:

a) like it

b) love it

c) gotta have it