This tiny Florida bank says APIs could make it a national player
Surety Bank in DeLand, Fla., is making what many would consider a risky move. It’s ditching its legacy core vendor for a cloud-based startup core provider with just a handful of clients.
But to Ryan James, CEO of the $97 million-asset bank, sticking with the status quo was potentially riskier.
The bank has signed with Nymbus, a startup in Miami, to replace its core system early next year. James said he was attracted to the open platform that relies on application programming interfaces to connect with a variety of providers.
“This will enable us to easily integrate third-party apps quickly,” James said. “That’s not possible with all the middleware and lack of integration in legacy technology.”
Many of the larger core vendors offer banks ancillary products — such as mobile banking — in addition to core processing systems. While this “all in one” approach can be convenient for banks, James said, the cost was onerous, as was the length of time involved in getting the bank’s existing vendor to respond to requests. James declined to name the vendor since the bank is still finalizing details to exit the contract early.
“By the time you got a product it was already outdated,” he said. “But our customers want banking technology to be simple, efficient and easily accessible at any time, through any device.”
By embracing APIs, Surety will not be beholden to any one vendor and can partner with fintechs and other third-party providers in a quick and efficient manner.
“So if there’s a great new digital consumer lending product out there, we can partner and begin offering it to our customers,” James said.
But the play isn’t purely about serving existing customers. James said the ability to introduce new products quickly could allow the bank to reach well beyond its three branches in central Florida.
“There’s no reason why we can’t expand without having a physical footprint out there,” he said. “We could potentially grow regionally and nationally now. We can have an easy digital onboarding process, and be able to take our same community bank feel out there to reach new customers.”
Despite his own enthusiasm, James said switching to a newer core provider still took some convincing.
“At the board-of-director level, some of them are only a few years away from retirement and are less inclined to take a big risk,” he said. “So there was some lobbying.”
Core conversions are often the scariest of topics for banks to confront, given the need for continuity and access for customers while completing the tough work of ripping out the guts.
James is particularly optimistic.
“A core replacement is not the heart transplant it once was; it’s not 12 to 18 months of hell," he said. "It can be done in seven months and much of it can be automated.”
Putting that claim to the test, James said the bank is expecting to go live with Nymbus by February.
The open architecture Nymbus offers is a common trait among the newer entrants in the U.S. core systems market. Startups like Nymbus, as well as foreign core providers looking to break in to the U.S. like Temenos and Finastra, are selling potential customers on their open platform and ability to easily integrate with fintechs.
“We realize we can’t be everything to everybody,” said David Mitchell, president of Nymbus. “We want to be the best at core and let [bank customers] integrate and partner with what’s out there.”
Despite their promise to modernize the industry, banks in the U.S. still lag the rest of the world in their adoption of APIs.
But this could be set to change, as more bank CEOs adopt the mindset of Surety’s James, said Brad Smith, managing director with Cornerstone Advisors.
“The concept of open banking makes a whole lot of sense, and even many CEOs are now realizing it,” he said. “It used to be if you mentioned APIs it immediately became a CIO conversation. The concept is gaining ground, but we’re still in that ‘tweener stage.’ ”
In other words, banks are thinking about it, but they're not quite committed.
Smith said that while API-driven core providers like Nymbus have been gaining some traction, they have a long way to go to influence the wider banking industry.
“For a new core vendor, it’s important to get those first couple [of customers] then show success and go from there,” he said. “They tend to start with smaller banks, but they need to get that flagship customer, that top-30 bank, that makes everybody say, ‘OK, this is legitimate now.’ ”