Prioritize API-Focused Tech Spending in 2023

Faced with the rising threat of economic uncertainty, many credit union leaders are speculating on the best plan of action for managing their budgets. However, industry tech spending is not going anywhere. Recent Cornerstone research indicated that in 2023, only 7% of credit unions expect their IT spending to be lower than in 2022. With this tech spending, 87% of credit unions have launched a 2023 digital transformation strategy and 10% have plans to develop one as well – which means institutions that fail to innovate their technology risk falling behind and losing their competitive edge.

While investing in new technology can be expensive, it is important for credit unions to consider the long-term benefits of doing so. Reports from Deloitte revealed that greater digital maturity is associated with stronger revenue growth and efficiency. Despite looming economic concerns, APIs and IPaaS are a powerful, flexible and affordable use of tech spending for credit union leaders in 2023.

The term API is an acronym that means “application programming interface,” and it allows apps to send information to each other. While there are numerous protocols and technologies involved, the underlying purpose of APIs remains consistent: To let one piece of software communicate with another.

Powering Innovation With APIs

Amid a recession, credit unions must find ways to continue investing in forward-looking technology while also cutting costs and improving efficiencies. This may seem like a tall order, however, focusing investment endeavors on the credit union’s core technology infrastructure through APIs empowers them to strengthen digitization pursuits. Implementing APIs is a growing innovation trend – going into 2023, 40% of financial institutions are making investments in APIs.

Credit unions can leverage APIs to connect disparate technology, make data more accessible and create a seamless user experience. A well-designed API can also make a credit union’s current infrastructure more agile, leading to increased revenue, expanded offerings and shortened time to market. From account openings to loan applications and more, there are several ways APIs are significantly impacting workflow and performance within the financial industry, including:

Improved customer experience: APIs are strategically positioned to enhance the customer experience and drive innovation efforts by offering better access to data on members’ activities and financial needs. Credit unions can use customer data to offer members additional functionalities, features and services that are tailored toward their unique needs.

Streamlined account opening: Fewer members are visiting branch locations in person today, which means it is more important than ever for credit unions to have convenient online account opening functionality. By taking advantage of the right API, credit unions can ensure the online account opening process is smooth and intuitive for members who may prefer to carry out banking interactions entirely online.

For example, if a credit union aimed to increase the number of credit cards opened by new and current members, it may choose to partner with a technology provider to automate account opening and implement digital decisioning to gain critical data insights. Leveraging an API would enable a seamless connection between the credit union and technology provider to streamline the integration process.

Easier integrations: APIs are an ideal tool for credit unions to experience smoother integrations with fintech providers. By implementing APIs, credit unions can minimize technical errors, save time spent on projects and maximize the service quality offered to members.

For example, a credit union wants to reduce time spent on the loan origination process and decides to partner with a software company to increase operational efficiency. In this circumstance, a strong API could act as an integration layer that could communicate smoothly between the credit union’s mortgage loan origination system application and the provider’s platform. As a result, the credit union will be able to easily connect the two systems to ensure proper loan originations and automated loan workflow.

iPaaS: The Key to Streamlining Operations

An integration platform as a service (iPaaS) is another strategy credit unions should direct their tech spending budget toward to strengthen the development, execution and governance of integration flows. This suite of cloud services uses data integration, API management and more to connect separate technology systems across a credit union, match members’ digital demands and deliver a seamless banking experience, without the need for a core system overhaul.

Leveraging an iPaaS to integrate core software and fintech applications is a rising trend within the credit union industry. Cornerstone reports indicated about 63% of credit unions have already invested in or deployed cloud computing technologies like iPaaS, and 16% are planning to invest in or implement them in 2023.

An iPaaS offers several advantages to credit unions and their membership base. It enables credit unions to establish a well-integrated system that allows them to generate greater efficiency through automated processes across several touchpoints of the institution. With the help of iPaaS libraries of pre-built APIs, integration through this software will decrease the workload for the in-house software development team.

Integrating via an iPaaS allows credit unions to have a seamless transfer of data between core systems and fintech applications to better serve members and deliver a more streamlined, intuitive banking experience. With the ability to quickly roll out new features and functionalities, an iPaaS offers credit unions a way to accelerate digital transformation and keep pace with member demands to ultimately improve member service, as well as satisfaction and brand loyalty.

Consumers expect strong digital offerings from every industry, especially in financial services, and those demands are not going anywhere, despite the looming recession. By investing in the institution’s core technology infrastructure through API and iPaaS solutions, credit unions can strengthen their competitive advantage, improve members’ banking experience and increase operational efficiency.

Joel Legg Vice President of Technology Core10 Franklin, Tenn.