The Challenge of Integrating Financial Systems and How the Regulatory and Servicing Environment is Mandating Change
By: Amber E. Gest
With multiple core processing systems and 3rd-party software applications, bank and credit union technical infrastructures are growing more complex with the need to integrate silos of information. With increased loan servicing and collections compliance requirements, the pressure to integrate these systems to provide seamless portfolio and data access has presented a costly and intensive undertaking – not only for bank and credit union IT departments, but for their software providers and core processors. It is no longer acceptable for these systems, or the data they hold, to exist in a vacuum.
Integration between core processing platforms and 3rd-party applications involves a data exchange which includes client and account information, and historically these feeds have been limited to only include data that was considered "mandatory"– i.e., the minimum data that was required to get the job done. As an example, with collections and recovery software applications, most data feeds from the core platform would only include delinquent loan information after the pass of the grace period. With the recent increases in regulatory scrutiny and changes in collections compliance requirements for sold/insured/guaranteed loans, it has become imperative for collections software platforms to receive delinquent loan information on the first day of delinquency (as servicing requirements of FreddieMac and FannieMae require that bank and credit union collections departments begin contacting debtors at day 3 of delinquency, instead of the typical contact after grace period). Another trend we have seen in the bank and credit union collections world is that new clients implementing a collections and recovery software platform, are now looking to bring in their entire portfolio – not only to properly automate workflow to ensure collections compliance, but to also provide the collections staff with a 360-degree view of the debtor's entire portfolio. Full portfolio awareness requires a collection software platform to be able to import data from not only the core processing platform, but from additional credit card and loan servicing platforms.
Real-Time Software Application Integration Mandate
In addition to full-portfolio awareness to facilitate efficiency and collections compliance, it has become a mandate that software applications also offer real-time integration to the core processing platform. In previous decades, data exchange between core processors and separate software application typically occurred on a batch basis. However, with the increasing demand of real-time access, this integration now frequently includes application integration to each core platform’s proprietary Application Programming Interface (API). Application vendors must now invest development resources into creating and maintaining integration to each core platform’s distinct API, and core processing platforms must also devote time and money to keeping their APIs secure, accessible, and relevant. There are still a number of platforms which do not support an API which allows for application connectivity.
There have been movements within the financial industry to “standardize” platform integration, most notably with efforts by the Credit Union Financial Exchange (CUFX), led by the CUNA Technology Council. Their goal to is create an open integration standard in order to provide a cost-effective and more efficient way for application providers to connect to core processing systems – eliminating the redundant programming efforts that application providers, CUSOs and financial institutions undertake to allow their multiple platforms to “talk to each other”. There are already a number of core processing platforms that have pledged their support to this initiative, including FIS, Fiserv, Harland, Open Solutions (now Fiserv), and JHA Symitar. More information about this initiative can be found at www.cufxstandards.com.
With the ever-changing banking regulatory environment and the complex loan servicing and collections requirements now mandated by investors, platform integration is key. Silos of information are no longer acceptable in any business unit of today’s financial institution – from sales and service, to bank and credit union collections and recovery. With initiatives to standardize and facilitate platform integration on the rise, we are still in a world where every core processor and application provider must shoulder the task of integration, and those who are not willing to will no longer be relevant.