ARTICLE
The challenges companies face when building bank integrations
6 October 2022
Companies building payment products or processing large volumes of payments as part of their operations often cannot rely on usual bank connectivity solutions. Their bank's web app or vendor's cash management system introduce technical, functional, and scalability limitations. The alternative is a direct integration with their banks that enables them to automate their payment operations from their in-house systems.
Although highly scalable and secure, banks’ direct connectivity solutions can be complex to understand and integrate, even for the most skilled product and engineering teams. They can also be a significant de-focus on a roadmap already filled.
At Mambu Payments, we have built more than 10 bank integrations over the last 12 months. This first-hand experience has enabled us to learn the specificities of every bank we have integrated with and refine our integration model over time. We now have a scalable process and a powerful bank integration engine that enables us to connect most banks to the platform in a fraction of the time it took to develop our first integration.
This article shares our learnings on the challenges of building direct bank integrations. We also outline how Mambu Payments can help accelerate bank integration projects, prepare companies for the future, and transform high upfront investment costs into predictable variable costs.
The challenges of building a bank integration
Getting the right interlocutor and pace of communication
Accessing banks' direct connectivity solutions is more complex than creating a self-serve account and obtaining your API keys. If not already done, the first thing to do before even getting access to the bank's documentation is to open an account, and subscribe to the bank's connectivity solutions. The right stakeholders to do so is the cash manager.
Cash management is one of the many lines of products and services that banks offer to their corporate customers. It is also one of the most technical. As a result, banks have built teams of cash managers that are distinct from teams of account managers.
Because account managers have large customer portfolios and need to liaise with different teams from within the bank, response turnaround can sometimes be longer than what product or engineering teams working on a sprint need to reach their velocity goals.
Choosing between all the bank connectivity options
Banks have strengthened their systems' reliability through years of iterations, keeping their customers’ funds secure and processing billions of payments yearly to power the economy. This iterative process created significant variability and complexity in those systems, reflected in the heterogeneity of their connectivity solutions for different use cases.
Connectivity
In Europe, connectivity channels include the below main channels
- EBICS servers are designed to automate payments securely but require payments to be manually approved
- SFTP servers enable end-to-end payment automation
- Messaging queues enable high throughput
- APIs are designed for companies looking for real-time payments but progressively expanding across other rails
- PeSIT and ETEBAC are bank connectivity protocols developed in France in the 1980s-1990s and used by certain banks
Considering the high upfront investment
Bank integrations present a high upfront investment for companies. The learning curve can be steep, even for the best product and engineering teams. And it is not infrequent for a company to spend 3-6 months designing and developing a bank integration, even for the most payment-savvy teams. At Mambu Payments, it took us three months to build our first bank integration and blueprint.
Bank integrations are also, unfortunately, mostly sunk costs. Since they rely on connectivity protocols and file formats that can be niche, the codebase created for the project usually has limited applicability to other parts of the company.
The hidden cost of bank integrations
In addition to the visible complexity and direct costs of building bank integrations, several hidden costs derive from the decision to build a bank integration.
- Slower time-to-market: The back-and-forths required to identify and subscribe to the direct connectivity solutions and features to use and the time to receive the relevant documentation can delay the start of the integration specification. If not properly accounted for, those projects can result in delayed business initiatives and missed business opportunities.
- Maintenance and upgrades: Like any software, bank integrations require ongoing maintenance. Additionally, payment schemes and networks go through regular updates. For example, the European Payments Council, which governs SEPA, issues new rulebooks yearly. As a result, regular upgrades of bank integrations should be planned and budgeted to cope with these changes.
- Retaining teams and knowledge: Training teams on bank connectivity and payment file formats takes time and effort. There are very few domain experts in Europe and knowledge build and transfer needs to be a key consideration for the business.
The case for an API-first connectivity solution
At Mambu Payments, we thought about how to step-change the experience of connecting with banks. And we believe a better path for a company with complex payment workflows is to lean on an API-first payment operations platform abstracting the complexity of the building. By relying on a well-documented API integrated with all banks, teams can:
- Accelerate implementation projects: By abstracting away the diversity and complexity of bank integrations with a single RESTful API, companies can integrate with their banks in record time.
- Future-proof integrations: An abstraction layer continuously updates integrations as banks launch new payment methods and features, such as SEPA instant payments or virtual IBANs, or update their standards. This ensures no technical maintenance work is required.
- Enable their companies to focus on their core business and product: Companies can concentrate on their core business and product instead of becoming experts in bank connectivity and payment file formats while using a platform that enables them to be on the cutting edge of payment innovation.
- Turn high upfront costs into predictable variable costs: Companies can turn upfront investment costs and CapEx into variable costs and OpEx, making it easy to forecast costs and payment unit economics; benefiting from scale effects stemming from building multiple integrations also ensures economics make sense for the company.
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