Listen: Open banking in US sees ‘groundswell’ of demand

Core provider Jack Henry is responding to a widespread shift in the financial services landscape with an open banking strategy that aims to facilitate a fintech-enabled digital ecosystem for community banks. [caption id="attachment_221396" align="alignright" width="300"] Photo by CanStock[/caption] The fintech disruptions and digital innovation that have caused sweeping changes in financial services have pushed local and regional banks to adjust. As community banks manage the shifting landscape, they must also take notice of the consumer push for open banking, Jack Henry Chief Executive David Foss says in this episode of “The Buzz” podcast. “There's been this real groundswell of open banking demand in the United States,” Foss tells Bank Automation News . “People are telling their financial institution that if they can't get data out of their financial institution to share with whoever they need to share it with, they'll find a different financial institution.” Listen as Foss shares the details of Jack Henry’s open banking roadmap, along with observations on the implementation of digital banking innovations. Bank Automation Summit, taking place March 1-2 in Charlotte, is the first and only event to focus solely on automation in banking. The event will feature the brightest minds from across financial services on intelligent automation strategies and deployment. Learn more and register here for Bank Automation Summit 2022 . Subscribe to The Buzz Podcast on iTunes , Spotify , Google podcast , or download the episode .

The following is a transcript generated by AI technology that has been lightly edited but still contains errors. Alijah Poindexter 00:06 Good day, and welcome to The Buzz of bank automation news podcast. I'm Associate Editor Elijah Poindexter. Recently I spoke with Mr. David Foss, Chief Executive Officer of core banking provider, Jack Henry, the core provider recently released their new open banking strategy and roadmap for your q4 earnings call earlier this year. I took some time with Mr. Floss to discuss the strategy along with the details behind it, and what the overall open banking and embedded finance landscape looks likeDavid Foss 00:32 in the US to begin with, I think there's a lot of misunderstanding of what open banking really is, you know, so people, people oftentimes confuse open banking with banking as a service on the kind of become intermix, but open banking, you know, specifically is about data sharing, so that the financial institution or whoever the customer is doing business with is sharing information appropriate to the customers needs meaning securely, and with those institutions, or there's other players that they want the data shared with not, you know, whoever were the bank or credit union wants the data shared with, it's interesting. Most people assume that because there are laws in place in Europe, that there is more open banking activity in Europe. But in reality, there is more open banking activity in the United States than there is in Europe. Because there's been this real groundswell of demand in the United States, people essentially saying to their financial institution, you know, if I can't, if I can't get the data out of my financial institution to share with whoever I need to share it with, well, I'll go find a different financial institution. So just because of that customer demand, I think this has continued to evolve in the United States to the point where we're today there is a lot of demand for for open banking and the concepts behind open banking. The good news for Jack Henry as a technology provider is we've embraced this concept of being open for many, many years. So we have not created these kind of artificial walls that that customers makes it difficult for our customers to create open connectivity to fintax, or in what the third party solutions, we've been for many years in the business of providing connectivity to make it easy for our community in regional financial institutions to connect up to whoever they need to connect to, in order to serve, serve their customers. So I think demand is only increasing, I think Jack Henry is well positioned, because we not only have the technology to support that demand, but we have the philosophy to support that demand. And I say it all the time to bankers, you know, you can find all kinds of companies out there who have technology, but do they really believe in the idea of making these tools available at a reasonable cost. And for community, a regional financial institution, that's just not a reasonable proposition. So we have the tools in place, we make it available to them at a reasonable, reasonable cost. And we really support philosophically, the idea of enabling the financial institution to choose to connect to whoever they need to connect to, in order to serve their customers in the best interest of their customer.Alijah Poindexter 02:56 For these local and regional community banks, you know, what have been some of the pain points you've seen? If you feel you know, if you're, you know, good to share those in terms of implementing digital banking innovations? What have been some of the pain points, some of the hurdles, that both vendors and banks face? And then maybe how does Jack Henry, sort of help these banks overcome those hurdles? If you can shareDavid Foss 03:17 I don't know that it's unique to the community bank or credit union or the regional bank, I think it's about whoever they're partnered with. So as I mentioned earlier, there are some of these companies out there who make it really difficult for the financial institution to enable some of these connectivities or make it really expensive for them to do that. So if they're not partnered with the right partner, you know, that's, that's the first challenge sometimes that that these these folks have, and then beyond that, you know, there's a strategy component here. So the financial institution has to decide, what what do I need to connect to, you know, what's my priority list as far as connections to serve my customer in the best way? What's, what's the the needs of my customer? So the thing I say all the time is, the financial institution has to create their strategy first figure out who is it that I'm serving? What's the profile of my customer that I'm serving? Secondly, okay, now that I understand who I'm serving, what are their needs? Because there are a million different things you could do? Well, what are the things I really must do in order to serve my customers? Now what technology helps satisfy that need that need for my customer? So working through those steps and really trying to zero in on what are the solutions that the customer of the financial institution really needs in order to succeed? That can be that can be challenging, you know, there's a lot of strategy work in that. And then there's a the process of kind of weeding through these 1000s of fintechs out there and figuring out which ones are the best to serve my, my customer's needs, then you have to attack the issue of Okay, now, I figured out what I need, and I figured out the solution that satisfies that need. Okay, now, how do I connect them into my core system? How do I connect them into my digital banking system? And for some technology providers, they've made that really difficult. Jack Henry, we've tried to make that really easy. Alijah Poindexter 05:04 So what was occurring both externally and internally that sort of facilitated the creation of this long term tech strategy for Jack Henry? David Foss 05:11 Yeah, I think the biggest thing that drove this was we were seeing, we did a study last year with javelin and what we determined in that study, and we knew it. And intuitively, we've been kind of running down this path for about two years. But this Javelin study really helps cement, this this concept. What we determined through that study with javelin was that the average person has 20 to 30, different relationships, financial relationships. So they have, you know, their traditional checking and savings account, they have their HSA, maybe they have their 401k, they have their investment account, they have their credit cards, 20 to 30, different banking relationships. And so the average person feels really disjointed as far as managing their finances. And we've seen that, you know, coming over the last few years, and so we embarked on this strategy, because we saw all this disintermediation happening, all this disruption happening in the industry. Okay, where's that opportunity, then, for us to create the chance for the financial institution to become the center of their customer's life again, even though that customer is using a bunch of different platforms. So we've created this ecosystem, that was a big part of the announcement, we've created this ecosystem, that now allows our customer to put solutions from Jack Henry on a public cloud platform, but also easily connect in these, these various FinTech players into that same platform. And here's the key now, we can present all of those different things to the bank's customer or credit unions customer in a single presentation. So imagine, and I say this all the time, forget about the website for the financial institution, think about their digital banking or mobile banking presentation, right? If you're in the mobile banking presentation on your phone, and you can not only see the bank stuff, you know, the your balance in your checking account and savings, that kind of stuff. But you can also see your crypto balance that has held in a totally different place, but it's presented there for you to see, you can see your mortgage, it's not with your bank, it's with some mortgage company, but it's presented for they're there for you to see in that same presentation. You're not leaving the app going to another app, it's all there available to you in that same presentation, that really can help create that sense of confidence and, and control over the customer's finances, because they have the ability now to see everything in one place. And I use the word everything you know, it's probably an exaggeration, because the bank or credit union, one connect every conceivable FinTech, but you get the idea, you know, the major things that you can run your financial life by, if you can see them all in one place. And oh, by the way, you can move money between them. So that's the other piece of this strategy. We've created relationships with all four, the major financial data exchanges, so accoya, urbanicity, plaid, and Yodlee, all supported by Jack Henry, all on this platform in the public cloud. So now you can securely move financial information and data between those applications in that same presentation. So we've seen all of this coming for years. And so about three years ago, we really started down this path of trying to create a new environment, a new ecosystem, for our customers to support that kind of disruption that's been happening in the industry. And of course, it's only gotten more and more prevalent this disruption. And so we're crying we're trying to raise we uses we're trying to disrupt the disruption. Alijah Poindexter 08:34 So you know, when we talk about next gen, and we can apply, you know, next gen technology, a next gen open banking strategy, a next gen open banking platform, how do you define next generation? What's kind of the mark between what we have now? And what sort of implied with that phrase? David Foss 08:49 Yeah, so it's all new technology written. So it's cloud native, right? So written on the public cloud hosted on the public cloud, written as a cloud native solution. So that's the starting point for, for a solution like this, no dependency on any legacy technology, like a legacy database. So there's no DB two, or you know, anything like that in a solution like this, because it's all living on the public cloud in a public cloud environment, heavy use of API's. So with API standards, which creates that ease of connectivity, and then you know, leveraging more than one public cloud providers, so you're not totally dependent on AWS, for example. You know, you can have multiple, multiple public cloud offerings for the customer. That's kind of the basic definition of what we're doing. And then component icing function. So historically, people have thought about a quart well not thought about historically this was true. A core system was a, you know, a big solution that had all kinds of functions in it. So all the account opening wire transfers, transaction posting, updating of transactions, you know, fraud detection. All these different things in a single piece of software. What we're doing now is we're unbundling all of those things, creating discrete components that run on the public cloud as discrete components. So now you can say, you know, I know you have a wireless module Jack Henry, but we found this one over here. That's, that's better for our needs and our financial institution. We're gonna slide that one in here instead of the one from Jack Henry. Okay, if that's better for the financial institution, we are totally supportive of that. Alijah Poindexter 10:26 You've been listening to the bus, a bank automation news podcast. Thank you for your time and be sure to visit us at Bank automation news.com For more automation news, you can also follow us on Twitter and LinkedIn. Please don't hesitate to rate this podcast on your podcast platform of choice. 10:41 Thank you

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Listen: Open banking in US sees ‘groundswell’ of demand

Jack Henry CEO David Foss details core provider's open banking strategy

AI-driven auto originations hit $4.1B through Upstart in 4Q

Low code and no code fintech solutions put banks in the driver’s seat

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