Historically, the bread-and-butter focus of the financial services sector has been providing discrete, stand-alone services. But the modern financial landscape demands something new: a seamless integration of various services into a cohesive user experience.
This perspective, viewing integrations as digital products, represents a seismic shift in the way institutions strategize. And it tilts the focus from traditional banking products to more integrated, customer-centric solutions.
What Are Financial Services Integrations?
In this context, integrations are digital connections that facilitate seamless interaction among different financial services and products. These aren’t just nodes that link systems, but products in their own right — complex amalgamations of software, user experience design, and cross-entity collaboration.
Increasingly, financial institutions have to think beyond their core offerings to include services that add value through integration and enhance the overall user experience. Integrating payment solutions into business management tools or embedding financial services into retail platforms are examples of such product ecosystems.
These integrations aren’t merely about technology; they involve coordination across multiple entities in a “value network,” each with its own systems, regulations, and customer expectations.
But integrating services like payments, lending, and money management requires a deep understanding of complex applications and a strategic approach to product design that considers multiple stakeholders.
Where the Market Demands Integrations
Today’s consumers expect financial services to smoothly integrate into their daily activities and transactions. They prefer not to step outside their current engagement — whether shopping online, managing a business, or planning personal finances — to use these services.
Embedded in Financial Transactions
In the past, people didn’t have a choice. If they needed cash for a purchase, they had to run to the bank. If they didn’t have funds for a transaction, they had to talk with a loan officer.
But the technology finally exists to remove some of the cumbersome extra steps that have always been a part of financial transactions. For example, “Buy Now, Pay Later” services integrate directly into ecommerce platforms, offering consumers the chance to take a mini “loan” on the spot rather than seeking one from the bank.
This convenience is transforming expectations around how financial services are delivered: embedded within the user’s journey rather than as standalone processes requiring separate engagement.
Available in Financial Apps
Financial institutions themselves also have opportunities to incorporate integrations to offer expanded services and improve the user experience.
Many users would be delighted for their financial app to offer broader services based on the information it has on them. That could mean feedback on spending patterns, help with budgeting, or support for doing their taxes.
In these cases, however, financial institutions may not have the capabilities or the desire to develop and maintain these non-financial functions internally. This is where third-party integrations come into play. By partnering with tech companies that offer complementary services, financial institutions can enhance their apps with additional functionalities.
Connecting a banking app with a platform like QuickBooks, for example, provides a suite of services like integrated tax tools, cash flow management, and financial insights. For the average user, this is a tremendous value add; for financial institutions, it increases customer engagement and saves the overhead required for developing such capabilities in-house.
Getting Started: The Challenges of Integrations
Partners and Projects
One of the initial challenges for institutions considering integrations is identifying where to begin, which involves determining which partners to collaborate with and which products and experiences to develop.
Many organizations struggle to narrow down this vast opportunity space to what they’re most equipped to deliver. But starting too broad dilutes focus and resources, making it difficult to materialize any single viable solution.
The crucial first step here is figuring out where your organization’s strategic capabilities align with market opportunities. Then, consider which opportunities will be attractive endeavors to potential partners.
Org Structure and Resource Allocation
Financial institutions are still in the early stages of adopting a product- and experience-focused development approach. As such, existing operating models don’t always adapt well to the needs of integration development.
Typically, financial institutions are structured around distinct business lines and technology departments. This siloed approach, while effective for managing traditional banking products, creates obstacles for developing and implementing integrations that cut across multiple areas of the business.
The issue begins with ownership. In most organizations, there’s no dedicated business owner for integrations, which span multiple departments, making it difficult to assign clear responsibility and accountability. Without a designated owner, integrations struggle to gain traction and secure resources.
Further, the traditional models for business case development, funding allocation, and project execution are ill-suited for integration initiatives. These projects require collaboration across business and/or technology lines, which can be difficult to coordinate across existing silos.
Moreover, the technology required to enable integrations often doesn’t fit neatly into any one department’s purview. It may require capabilities that span multiple teams or systems, further complicating development and implementation.
Product and Architectural Development Decisions
To foray into integrations, financial institutions face significant decisions in product strategy and architectural development. From a product perspective, businesses need a unified strategy and vision. Their solution must address the majority of initial targeted use cases without becoming bogged down in constant customization.
From an architectural standpoint, the challenge lies in establishing a service-oriented product that supports easy integration and provides the necessary tools for partners to self-service. This should include robust testing environments and the ability to upgrade as capabilities evolve.
Key Opportunities in Treating Integrations as Digital Products
Viewing integrations as digital products facilitates opportunities for both defending existing market positions and expanding into new areas. The stakes are high, particularly in the payments ecosystem, where traditional methods are increasingly being replaced by or supplemented with alternative digital solutions.
Digital transformation helps maintain a competitive edge and expand the total market by introducing innovative products that streamline and enhance payment processes.
Traditionally, payments have been dominated by cash, checks, and card transactions, but digital transformation has spawned new options like online payments, mobile wallets, and peer-to-peer (P2P) platforms.
By treating these integrations as digital products, financial services can defend their current positions against fintech disruptors and potentially increase their market share by offering more efficient, secure, and user-friendly payment solutions.
For example, integrating advanced payment systems that support instant payments or integrating with platforms like mobile wallets. Such innovations help retain existing customers and attract new ones who prefer digital-first methods.
Best Practices for Leveraging Integrations as Digital Products
Establish Vision, Objectives, and Measures
The first step in successfully leveraging integrations is to establish a clear vision and set measurable objectives. This involves understanding your Total Addressable Market (TAM) and identifying the specific segments of the market where an integration will create the most impact.
Identifying your specific viable market segment is crucial. A product developed for an Amazon-level audience won’t serve a local mom-and-pop user well, and vice versa.
Form an Empowered, Cross-Functional Team
One of the critical steps in treating integrations as digital products is forming an empowered, cross-functional team dedicated to governance and decision-making. This starts with recognizing that your organization likely isn’t structured in a way that’s conducive to bringing integrations to fruition.
With that in mind, focus on forming a new construct with the authority and resources needed to manage an integration initiative from conception through to deployment and scaling.
Start Small With a Select Use Case
We often recommend starting with a small, focused use case with a high likelihood of success. This builds momentum and teaches critical internal lessons before expanding to additional use cases. You’ll learn lessons around team structure, collaboration, funding models, etc. that will help you refine your approach for future projects.
Working With Clients on Integration Development
When financial institutions decide to embrace integrations as digital products, a little guidance can be helpful in approaching this new paradigm. Below is a brief overview of how we typically work with clients to develop their integration capabilities:
1. Assess Current Integration Capabilities
First, we evaluate the institution’s existing integration infrastructure, including APIs, developer portals, and other technical assets that facilitate connections with external systems and services.
2. Evaluate Integration-as-a-Product Maturity
Next, we assess the organization’s readiness and experience with treating integrations as products. This involves factors like:
- Is there a clear vision and strategy for integrations?
- Is there a dedicated team for developing and maintaining these capabilities?
- Does the institution conduct research and gather insights on market opportunities that integrated products and experiences could meet?
3. Prioritize Opportunities With an Assessment Matrix
To help institutions prioritize opportunities, we use an assessment matrix to help determine which integration projects to pursue first, based on criteria such as:
- Institution’s current capabilities and readiness to deliver
- Technological maturity of potential partners
- Alignment of business objectives between the institution and partners
- Potential for successful commercialization
- Existing relationships versus new partnerships
This matrix helps institutions make informed decisions about which partnerships are likely to be successful in the early stages of their efforts in integration.
4. Create a Roadmap
Finally, we develop a “now, near, next” roadmap that outlines both strategic decisions and tactical improvements. This simultaneous bottom-up and top-down approach allows institutions to:
- Address high-level strategic questions about integration goals
- Build foundational technical capabilities
This balanced roadmap ensures institutions can start making progress on their integration journey immediately while also preparing for future opportunities as they arise.
Final Thoughts: Concerns for the Future
Financial institutions take their responsibility to protect customer data seriously, which means any crossover with third parties can evoke concerns. And, certainly, we have seen some of the early fintech integration pioneers become subject to regulatory penalties due to oversight issues.
That said, careful selection of responsible partners and thorough evaluation of risk and compliance issues ahead of time will help you avoid both legal penalties and dramatic product revisions down the line.
The best advice I can give to financial institutions is to really consider whether the market trend toward integration will truly impact your business. Is your market share in question? What about your future growth?
If the answer is yes, then your path forward requires careful consideration of the issues above:
- How do we start to structure our organization in a way that allows us to set clear strategy and vision related to integrations?
- How do we fund and enable them to start making decisions to enact that strategy?
- How do we ensure we’re committed to and focused on making that first instance a success?
- How do we choose the right partners and enable the right teams to focus from a priority perspective?
At the end of the day, integrations are a product, even if they include other products within them. Institutions will find their best success if they embrace this product nature and modernize internal structures and processes to facilitate this new wave of development.