How Sound Credit Union Built a Foundation for Rapid FinTech Innovation
As part of our Keeping up with FinTech webinar series, Ongoing Operations (OGO) hosted David Wexler, CEO of ModusBox, and Martin Walker, VP Digital Experience & Innovation of Sound Credit Union, a behind-the-scenes look into Sound CU's digital transformation journey. Martin is responsible for enhancing the credit union members' digital experience through FinTech partnerships that align with the organization's strategic directives. As a result, Sound CU partnered with ModusBox to unlock rapid innovation through an API-led digital transformation initiative. In this webinar, David and Martin share the cultural, operational, and technical challenges overcome along the way, the best practices employed, and how the initiative has empowered the credit union's ability to partner with new FinTechs quickly!
Key takeaways from this live Q&A webinar:
David:
What initially drove Sound Credit Union to digitally transform the organization?
Martin:
Well, David, I like your definition of Digital Transformation: building the foundational capabilities that allow credit unions to change and innovate rapidly. There is often confusion between true digital transformation and digitization. Digitization takes standard business or analog practices and moves the same functionality to digital channels. That by itself is not a true transformation. However, when we can change that foundational layer, it enables us to leverage a lot of new technology. It allows us to do things we could not do in those other analog channels, such as AI machine learning and leveraging the vast amounts of data out there.
For Sound Credit Union, it was all about keeping up with the level of experience that consumers are used to from e-commerce, FinTech providers, and our big bank competitors. So it wasn't good enough for us to simply offer a digital banking app; we had to do a lot more than that.
David:
What was the main reason for connecting to the banking core using an API-led integration layer? What were the key drivers that led to making this decision?
Martin:
The first thing was recognizing the level of innovation in the market from not only FinTechs but big banks with billions of dollars in their technology development budget. As a 2-billion-dollar financial institution, the only way we could remain competitive was to find ways to partner with some of those FinTechs and provide those solutions to our members. We really couldn't do that with our legacy point-to-point integration architecture. It looked like a spiderweb. If we wanted to bring in a new technology provider and they needed to integrate into our Core, digital banking system, or our lending system, it would require three separate point-to-point integrations. The solution we developed was an API-led architecture with endpoints already developed. Now, we can simply connect the endpoints needed and be up and running much faster.
David:
How did vendor lock-in and cost factor in your decision to digitally transform?
Martin:
One of the first projects we took on was changing out our digital banking providers. We connected both through the newly-created API endpoints rather than creating a direct integration between the digital provider and the banking core. If we need to change any of our providers, we know that it won't break any of our other integrations, and we'll never need to rebuild with a new provider. Simply put, we unplug one provider and plug in the new one. Instead of being leveraged by our legacy providers, we can go out and find the best-of-breed solutions to implement new functionality without being locked into current vendors.
David:
What was the process for budgeting and approving a project like this?
Martin:
There was an immediate impact and a long-term impact. The direct consequence for us was immediately removing vendor middleware solutions. Those cost savings essentially paid for the initial build of the ESB and API layers. Those savings made it a relatively easy decision for our CFO and CEO from a cost standpoint. The more challenging obstacle was demonstrating to our leadership that it was safe and secure for our members and us. We identified contracts expiring for a more long-term impact and determined how to save time and energy by bringing those into our system without incurring additional costs.
“To date, we’ve mitigated over a million dollars in costs!”
David:
Tell us more about vendor middleware. What is the difference between those vendor-provided solutions and the API-led approach we have been discussing?
Martin:
In reality, vendor middleware is just a single integration between two systems that acts as a single-use, single-purpose solution. As a result, you'll pay a high implementation price and expensive ongoing annual licensing fees. Suppose there are three systems that each require integration. That means you'll be managing three different middleware solutions and three costly budget items.
With the API-led approach, you can reuse the same API endpoints to connect multiple systems. Rather than various pieces of software, everything comes in from the same platform. Thus, the API architecture is much less expensive on a per transaction and per integration basis.
David:
What were some of the organizational challenges or obstacles that you faced?
Martin:
In our industry, it's not uncommon for executive and senior leadership to have worked their way up through the organization. As a result, they are familiar with the standard way of doing things. At Sound, we have had the same core provider for 22 years, and we have senior leaders who have been here before it was installed. A big part of overcoming the cultural obstacles was going through the educational process with our leaders. That meant taking some calculated risks by doing our homework and showing our leaders how this project will significantly impact the next 3-10 years as the architecture continues to evolve.
Because the initial project paid for itself in cost savings, there wasn't much push back early on. However, as we progressed forward in our strategy, we found a need to continually educate our leadership and department heads on the new direction. Our people tended to revert to the way it had been done in the past.
We also fought our legacy vendors because they would present solutions to "make our lives easier." This created a mixed message with our people. Everyone was asking us, "Why do we want to change things and do it this new way with APIs?" We had to change the mindset culture from "this is one project" to "this is an ongoing strategy and the way we move forward." And, we're starting to see that culture take root in the organization. We recently completed two new integrations. On one, we saw about 75% time & work savings, and on the other, it was closer to 90% time & work savings!
"We are moving at a pace now, where we are waiting for the business to catch up."
The best part is, our business counterparts are starting to ask potential vendors if they have APIs. If the answer is "no," it's a deal-breaker.
David:
What are the best practices or things that you have learned along the way and would pass along to companies considering an API-led integration architecture?
Martin:
It's essential to work with someone experienced in API development and has a clear strategy - ideally, a partner in the financial sector because of the regulations and requirements. You can hire developers who know how to write APIs, but you want someone who guides the bigger picture and will build out the library of reusable assets. Reusability is the key to the whole initiative because it saves cost and time.
One thing we are currently working on is setting up automated testing. As you are building out these APIs, it is impossible to plan for every use case. Automated testing enables you to test the edge cases before going live to ensure everything is working before deployment.
David:
How did implementing APIs and using API management tools change the culture at Sound CU?
Martin:
It's really about having an open-mindedness to do something differently. This is an industry that is a bit set in its ways.
The previous culture between IT and our business stakeholders went something like this, "We found something we like. Buy it, implement it, and let us know when it's done." Today, the IT department is a strategic partner in the process of finding solutions that will help define and solve business problems.
For example, our process for adding a joint member to an account was relatively complex. Our IT team built something we call the Enhanced Service Portal (ESP). The ESP guides our frontline staff through a dynamic process to accomplish previously difficult tasks. What used to be a 10-minute manual ordeal has been reduced to 2 minutes. This is possible because we are able to easily connect these tools through the APIs that are already created. Our frontline staff has embraced this change and is excited about the 8-10 more use cases they want us to develop.
David:
What strategic outcomes do you expect to realize by implementing the API methodology and tools?
Martin:
From a strategic standpoint, we want to build stronger relationships with our members. Most of the time, our members are interacting with us on a transaction basis. Our goal is for that to be frictionless and quick. If it isn't, we become an interruption in this process. The consultation part of the relationship is different because they want us to educate and help them with their problems.
With the API-led methodology, we are developing ways to move people through transactional processes faster. As a result, our frontline staff has more time to spend on the relationship-building conversations with our members.
Listen to the whole conversation
If you would like to hear more about how Sound Credit Union built a foundation for rapid FinTech innovation, view the webinar in its entirety. Martin goes into more detail about how the organization saves time, cost, and headache for its frontline staff through innovation solutions. If you would like to learn more about the API-led approach and how it can unlock access to your banking core data and other applications, WATCH THE WEBINAR!
Additional resources:
Watch the webinar: https://attendee.gotowebinar.com/recording/389594769135849999
Learn more about ModusBox: https://modusbox.com/
Learn more about Sound Credit Union: https://www.soundcu.com/