Systems Integration in the Banking Sector: Challenges and Best Practices

Igor Izraylevych

3 min read

Systems integration in banking (sometimes referred to as SI) is the highly complex process of upgrading and connecting essential services that have traditionally been separate. These things include basic back-end administrative tasks that employees may use as well as products and services that their customers can enjoy.

Systems integration is not really a new concept but has recently been accelerated, in part due to changes that the coronavirus pandemic has imposed on in-person banking. Now more than ever people need remote, easy access to their money or loans.

However, in order to perform a successful integration, a bank must find the right balance between goals, budget, and labor resources.

In this article, we’ll go over the different trade-offs that must be made when creating and implementing a systems integration project in banking.

Core Banking Systems Integration

Systems integration in the banking sector

A system integration project usually begins with an assessment either done in-house or by a specialized development team. This process seeks to identify the core banking systems that are in need of an upgrade and perhaps prioritize them as well. 

These type of processes are usually vital to the bank’s overall health and include things such as:

  • Lending services, for example home, auto, or business loans. 
  • Accounting, such as calculating and paying interest rates, CD dividends as well as subtracting any fees or penalties incurred.
  • Deposits by check, ACH transfer, or wire, ensuring the correct amount is transferred and verified to be legitimate.
  • Money withdrawals from tellers, bank or network ATMs by customers using their bank cards.
  • Customer service by phone, email, or chat.
  • Website services such as account access, applications, monthly statements, and financial data exports to Quicken.

Even today, many of these older banks use systems that are running on very old software, sometimes even done via paper or fax machine. Legacy banks have traditionally been very reluctant to change, but market pressure from new fintech companies and the general industry push to adopt new technology is forcing their hand (along with covid).

The future of banking lies in smart, secure, and easy access, which integration will provide.

These established banks understand why they need to do this and know that when completed, each integration gives an additional service or functionality that benefits everyone.  

  • Integration inevitably improves customers satisfaction, making it possible for them to bank at their convenience.
  • Integration allows for more sophisticated services.
  • Integration enhances a bank’s overall security as more transactions can be easily monitored and flagged if necessary.
  • Integration is forward-thinking.

However, as you may very well imagine, integration is a complex process. Any misstep could result in not just angry customers, but perhaps large financial losses from hackers, thieves, or simply human error.

Up until recently, integration was pitched as an “all or nothing” solution. Now it is possible for firms to perform a more targeted approach, finding a pace that doesn’t overload the development process or break the bank (pun intended). 

The Unattainable Triangle

There is an old saying in the business world and it certainly applies to systems integration as well:

You can have your product fast, cheap, or good:  but you can only choose two of the three.

Essentially, it means you can integrate cheaply and quickly (but it won’t be very good), integrate cheaply with high-quality (but it won’t be done quickly), or integrate fast and good (but it won’t be cheap). 

This conundrum is sometimes referred to as the unattainable triangle

The Promise and Pitfall of Third-Party Solutions

Because of these factors, some banks and development teams are tempted to use third-party solutions, coding or software that someone else has developed.

This can save both time and money, which of course is a good thing. These ready-made solutions may have the same features the bank is looking to add and do not have to resort to being built from scratch. Some are open-sourced, which can offer greater security and flexibility. 

The downside is that third-party development can’t be fully controlled:

  • A third-party may change features or functionality pf their software without notice.
  • Some features that are integrated may not be used, wasting development time and money.
  • Development could stop altogether, forcing the bank to switch to another solution.

Creating a Strong Plan

Now that we’ve discussed various factors of the development process, you can see why it’s important to have a good strategy in place before banks begin a systems integration project.

  • Identify the legacy systems you want or need to integrate.
  • Don’t take on too much at once as it could overwhelm your development team.
  • Assess your budget, use it to inform your goal setting. Be realistic with what you want to accomplish.
  • Look for ready-made solutions with the same functionality that can possibly save development costs.
  • Remember that you may not have the same level of control over these applications.
  • Fast, cheap, or good: choose two.

Talk to S-PRO

When you’re ready to begin discussing system integrations, connect with us at S-PRO

We are a software development and consulting partner that has been helping banks with system integrations for the past 5 years. We have a team of over 150 developers who are ready to take your project from discovery to launch and beyond. 

S-PRO utilizes an agile method of development, allowing the process to be fluid and creative with the ultimate goal of benefitting our client. We make sure to be in constant communication and to immediately respond to questions or concerns. Transparency is one of our key commitments. 

Our specialties include Big Data as well as AI and blockchain; these are the key technologies that are central to the future of banking. We can help with UX/UI development and branding along with web and mobile apps that will work seamlessly with your core systems. 

When you are ready, we strongly encourage you to contact S-PRO and set up a free consultation session. One of our expert associates will listen to your needs and from there help you make the smart decisions that will result in a successful system integration.

Igor Izraylevych