What is banking integration?
Banking integration is a complex process where cross-border banking activities are interconnected with the cross-border flows of banking assets. Over the years, regulatory agencies have lowered barriers in the banking sector, and technology has advanced. This advance has decreased the cost of providing banking services across borders. Globally, corporate activity has increased the need for international financial services. Such activity has fuelled the demand for global banking integration. The process is underway, and soon most bank markets will include large foreign components.
Over the last few decades, countries have actively removed key regulatory barriers to international banking. Technology makes it possible for banking organizations to handle massive information flows across multiple locations. It also helps banks evaluate and manage risks at lowered costs. Such developments bring down the cost of supplying cross-border banking services.
Technology contributes immensely to cross-border banking capabilities, and corporations are growing at a phenomenal speed; the demand for more complex international services is constantly on the rise. Despite multiple technological developments, the banking industry still has a long way to go before it can globally integrate.
Current banking industry status and requirements
The current banking system and its clunky, outdated applications are having an impact on banking integration. Most banks across the world still function on legacy IT infrastructure due to stalled IT development. Each country and its banking institutions have varying levels of technology adoption, and bringing it on to a single platform of operations is a challenge. Current banking systems generate a lot of data, but this data is still managed in silos and with antiquated data management systems. Low-level technology is usually employed to deal with the data, which does not offer any benefits to the bank. There is also a lack of customer-centric engagement tools.
This means there is non-compliance with necessary regulatory standards,which is a must when you are contemplating uniform standards in international banking. Customer experience is poor, and satisfaction levels drop. Revenue, which is a crucial factor for successful banking, reduces and can be a loss of reputation for the bank, often hard to restore. With such hurdles, new product development is often slow, and the cycle from the drawing board to execution is a long one.
From a technological perspective, the banking sector needs an agile information technology infrastructure. Banks must put intelligent data management systems in place, leveraging the power of the Internet of Things, the cloud, and other such technologies. Businesses should adopt predictive analysis and machine learning to enable innovation and should bring customer experiences into focus to be compelling. Finally, the banking sector should implement a robust regulatory framework for managing both customers and businesses.
With these adaptations, businesses will reduce operation and compliance costs. The process of automation will ease the pressure on critical decision-making for banks. A banking system that is well integrated with technology is in a good position for increased revenue for each service or product it offers. Banks can implement new initiatives quickly, and revenue can rapidly grow.
Challenges to global bank integration
Besides the banking sector’s current status across the world, challenges to banking integration have also arisen from fintech companies. Their advantage comes from an agile structure and customer-centric approach. Fintech companies thrive because they do not have strict governance but have not hurt banking services as expected because of their lack of experience in the field, inadequate capital, and a small customer base.
Compared to fintechs, techfins are companies that create technologies as their core function and use them to provide financial services. Techfins come with a vast customer database and adequate experience in personalized banking requirements for corporates and individuals, making them serious competition for the banking sector. Techfins analyze vast amounts of data, which gives them an edge over traditional banks.
There are other hurdles to bank integration such as market saturation, lack of uniformity, and technology implementation issues. High concentrations of banking in regional markets can make it difficult for global banks to penetrate and make the necessary technological investments for expansion.
Additionally, the lack of uniform protocols makes integration difficult for all providers. Uniform protocols make business easy, from getting a credit card to enforcing contracts.
Finally not all countries’ banking systems have evolved at the same pace. This can be a stumbling block to technology implementation across financial markets. Similarly, regulatory norms vary across countries, and it can be difficult to find uniform ground. While some countries are fully integrated, other countries lag behind with siloed bank systems or state-wide data silos.
Technologies to assist bank integration
Application Program Interface (APIs)
APIs are well known for the speed, personalization capabilities, and agility. Most full-stack banks are integrated through APIs. This technology is crucial to bank integration.
Currently, there is approximately a 35 percent implementation of APIs in community-based banking. Banking institutions need to quickly integrate partner data and products to increase efficiency. A particular challenge to the implementation of API is during partnership mergers. Processing of such partnerships involves long legal negotiation, pricing discussions, revenue sharing debates, and more. This can stall API implementation.
Moving operations to the cloud has benefited the banking sector immensely. Cloud technologies are needed to support artificial intelligence and its adoption. Since artificial intelligence deals with vast amounts of data, the cloud is the ideal platform for harnessing, processing, and utilizing information. It is essential when banking services begin implementing data analytics to enhance performance of customer-based activities as well as internal organization processes.
Digital account opening
Digital account-opening technology is rapidly being implemented across banks, with many organizations setting up new systems or upgrading existing ones. The key to this technology is identifying how to get the process right. As banks implement digital technologies, regulations must ease to help customers access portals. Auto-filling forms are standard procedure, but banks have to ensure that identity verification protocols are robust and compliant. This technology will see a major boost in the banking sector.
Banking integration benefits from an investment in video technology. Videos speed up the process of decision-making, enhance productivity, ensure innovative products and services, and are vital for enhanced customer experience. Video tools can also help bank marketing operations improve services and surpass competitors. Additionally, video tools bring in a human element, which is essential to better functioning business operations.
Blockchain decentralizes financial management from a single point to a network of computers. Implementing blockchain technology reduces operational costs for banks quite significantly. It helps banks enhance their capabilities with payments, remittances, and traceability goals. Data-sharing procedures are boosted when collaborating within the bank’s network.
Artificial Intelligence (AI) comprises a wide range of technologies such as data science, the Internet of Things (IoT), and Natural Language Programming (NLP). Each of these technologies works to advance the operations of a financial institution. Banks leverage AI to strengthen customer processes.
Customer Relationship Management (CRM)
CRMs have been around for a while, and banks are noticing improved customer intimacy with these platforms. CRMs help increase cash flows, improve offerings, and enhance customer experiences.
The future of bank integration
As the banking business grows, banks must critically evaluate existing banking structures and ensure they are developing in alignment with international policies like foreign exchange or cash flow management. This strong base will ensure that new platforms are well set up for bank integration.
Banks that are crippled by lack of IT infrastructure, governance and compliance issues, or stifling legislation stand to lose customers, income, and quickly become irrelevant.