Struggling to improve technology, financial institutions turn to middleware

Middleware is an adaptive software layer that financial institutions can apply to their core; other applications and technology connect and send data and messages through it using application programming interfaces, or APIs, instead of directly to the core. It functions similarly to a power converter, which can change currents or voltage between a wall socket and an appliance, and a power strip that offers different outlets and ports.

“[Middleware] allows you to do real-time activities and helps with lower code integrations. One benefit is that you can scale a lot faster,” says Mohammad Nasar, a principal in financial services consulting at Crowe LLP.

There are two types: middleware that facilitates banking as a service partnerships with customer-facing fintechs and middleware that facilitates the bank’s own products and services.

Middleware isn’t intended to displace a financial institution’s core, which serves the vital purpose of being the central system of records, says Joel Legg, vice president of technology at Core10, which makes the Mesh middleware. But smaller institutions that rely on their core provider for services like online banking or payments complain about slow development cycles, an inability to have their project prioritized or costly upgrades and integrations. In fact, 74% of respondents to Bank Director’s 2023 Technology Survey say integrations with a core are a major challenge when it comes to planned upgrades and implementations. Additionally, the speed at which a core processes data and transactions may not be sufficient to support real-time technologies in payments or fraud.

 

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