How an API-Focused Strategy Can Transform Traditional Trust Technology

Written by: Brandon Whittington | ProTrustee

Over the past decade, cloud technology and APIs have radically transformed business across multiple industries, allowing companies to implement easy-to-use software applications without complex and costly IT infrastructure. 

But while entertainment, ecommerce and other industries have been eager to modify their businesses to fit the software-as-a-service model, the financial industry has been far slower to modernize their companies using cloud-based technology. The trust business, in particular, has unique challenges as a result of limited technology options.

The good news is that there are signs that this is beginning to change, thanks to API-driven innovations, new technology solutions based on trust administration expertise, and open architecture.  

A Growing Movement

The cloud has been a great first step. According to a 2022 McKinsey survey, among financial services leaders, only 13% had half or more of their IT footprint in the cloud. However, more than half of those surveyed—54%—said they expect to shift at least half of their workloads to the cloud over the next five years. 

The trust industry has been known to lag trading and advisory platforms in the financial services sector. From small to even some of the largest-sized independent trust companies and bank trust departments, these entities have generally employed older, less flexible systems that don’t adapt —so much so that as a result, many of the operational functions require manual processes for key fiduciary activities presenting data and human errors. Too much time is spent on day-to-day administration and data reconciliation, at the expense of fiduciary compliance and revenue-generating activities.

Better Integration

One reason why it’s becoming a lot easier to implement these technological changes is because API technology offers a bridge from older tech to newer, open systems based on trust domain expertise.

For example, my company ProTrustee, requires a three-pronged setup that allows our system to communicate with both the trust accounting system and custodian. Just a few years ago, this whole process would have required setting up separate data connections between the accounting system and custodian, costing significant time and requiring dedicated resources to manage the data infrastructure. But now, we have partnered with fintech firm, BridgeFT, which provides the industry’s only API-first software and data aggregation platform, to connect financial institutions and multi-custodians in a modern WealthTech-as-a-Service model. Not only is the setup faster and more affordable, but it makes it much easier to forge relationships if our clients know that we can quickly and easily pull in critical data sources to our fiduciary workflow and compliance tool rather than having to do one-off integrations, which can take months to complete. Partnerships like this are a game-changer for financial startups like ourselves. We have a vision to collaboratively improve productivity and lower compliance costs while maximizing effectiveness for the industry. Innovations in cloud-native, API-first technology allow us to actually bring that vision to the market in a fraction of the time and cost we would have had if we had to build individual custodian connections ourselves or work with a traditional account aggregator.

Punching Above our Weight

It’s tempting to make cliché early-stage business comparisons here, but those wouldn’t be accurate. When it comes to the trust business, the established vendors are clearly larger, but they are also older and slower. Issues like errors, delays, and compliance breakdowns commonly occur because of the friction between the underlying technology, the user, and the end trust customer. As trust advisors begin to have more access to better tools in their tech stack, the ability to implement and seamlessly integrate applications has still been difficult because of a lack of simple APIs. 

That was the rationale in starting ProTrustee, frankly. If ever there was an industry that needed digital transformation, it was this one. Simply being able to integrate with complementary applications in a tech stack through APIs could allow advisors to change the way they operate their trust companies. With that come added benefits like reduced errors, better policy compliance, more controlled data accessibility, and reduced license overhead and app overload.

In the years ahead, as the “Great Wealth Transfer” marches on, trust companies will have the opportunity to modernize their software and infrastructure. Trust beneficiaries and trust company employees expect the ease and simplicity that comes with cloud-based software they use everywhere else in their day-to-day activities. To win a sizable share of the growing market around trusts, trust businesses will need to meet these expectations by signing onto modern software and infrastructure.  

A New Golden Age

The financial sector should learn from other industries that have been early pioneers of cloud-based technology and APIs. Large companies such as Shopify created cloud infrastructure that has given rise to millions of flourishing small businesses. In the trust industry, a similar opportunity exists to help firms build their ideal tech stack with less resources needed and greater return on their investment. The financial services industry has an opportunity to not only modernize its software but to create an entire ecosystem that will allow many ancillary fintech companies to thrive. 

As with any significant investment, it’s easy for companies to make excuses for failing to modernize, deeming it too difficult or costly, or too much of an interruption to their business. In truth, the greater risk is to do nothing and let your competitors own the future. Even now, the more innovative trust companies are starting to see the benefits of seizing the opportunity for modernization and capturing scalable growth. It’s time for the trust business to walk alongside other industries that have seized the power of elegant APIs and better integration.

(Brandon Whittington is founder of ProTrustee, a digital platform and workflow solution for trust industry professionals.)

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