iPaaS: A Key to Unlocking End-to-End Automation

The vast blue ocean of business automation is awash in arcane acronyms. RPA, BPA, WLA…what does it all mean, and more importantly, which tools will be most effective in helping you achieve your strategic business goals?

One of the newest terms is iPaaS, which stands for “integration platform as a service.” The technology was first developed in 2011 as a way to integrate and connect various cloud applications.

Today, iPaaS is growing in popularity. But misconceptions around how to best deploy the tool has led to frustration and slower rates of usage among some financial services executives. As the industry confronts a number of challenges, including a dearth of skilled talent and poor integration among legacy and cloud-based systems, iPaaS may be just the right tool, at just the right time.

Let’s set the record straight about this automation technology, and explore the industry trends that point to iPaaS being more than a “nice to have” for financial services organizations.

iPaaS solves challenges unique to financial services

Financial services organizations are faced with several back- and front-office challenges. These include integrating multiple legacy on-premises and cloud-based applications that don’t play well together. In addition, financial services IT departments are often resource-constrained, and typically face a backlog of automation projects. Meanwhile, business operations leaders know where automation is needed, but they don’t have the capabilities or resources on hand to manage these projects on their own.

That’s where iPaaS can truly add value for banks, credit unions, and insurance firms.

iPaaS is a suite of cloud services that helps an organization automate, integrate, and connect applications and data in any environment.

In contrast with other automation tools such as workload automation (WLA) that use batch processing, iPaaS is a real-time form of automation that leverages standardized API integrations to connect data across disparate software applications.

For example, an iPaaS solution can be used to integrate a customer relationship management (CRM) system like Salesforce with accounting software and create a record in the CRM when a borrower makes a payment.

Though the specific integrations may vary by solution, the purpose of iPaaS solutions is to connect disparate applications, services, and data sources, allowing information to flow among them.

As a result, an iPaaS solution serves as the central hub for an organization’s processes and data.

iPaaS solutions enable organizations to seamlessly integrate their digital ecosystem through pre-built, standardized connectors. And they empower users across the organization to own their automation through an intuitive, easy-to-use platform.

Modest usage, satisfaction obscure big opportunity

In SMA’s 2024 State of Automation in Financial Services survey of 580 U.S.-based executives from the banking, credit union, and insurance sectors, we asked respondents how they use eight of the most common automation tools. The survey found that 38% of respondents use iPaaS currently, ranking it in the bottom half of the most used tools. In comparison, 56% of respondents currently use WLA and 49% still use a basic job scheduler.

Additionally, iPaaS lagged behind all other automation tools in satisfaction. This may be due to the technology’s relative newness, or it may highlight a lack of iPaaS solutions purpose-built for financial services. Many well-known iPaaS solutions are relatively horizontal, designed for large enterprises, and don’t include the integrations that deliver the highest value to financial services organizations.

On top of that, iPaaS tends to be pricier than other leading automation technologies.

Yet despite its comparatively low rates of satisfaction, iPaaS spending highlights the growing importance of this technology in digital transformation initiatives—among the 38% of respondents that reported using iPaaS, 58% spent over $50,000 on this type of technology. And 37% of respondents plan to increase their use of iPaaS in the coming year.

Digging into the data a bit more, it’s easy to see the enormous potential of iPaaS in helping organizations achieve outsized efficiency gains, better customer service, and superior data capture and analysis.

How automation leaders leverage iPaaS

The State of Automation survey uncovered some major differences in how automation leaders and slow adopters deploy various automation tools in their operations. Among the most significant areas of divergence is in their use of iPaaS.

We split respondents into groups based on their level of current automation. We defined those respondents who have automated at least 80% of their operations as “automation leaders” and those who have automated a lower percentage of their operations than the median (41-50%, based on our survey) as “slow adopters.” Then we compared how these two groups are using emerging automation technologies, focusing on factors like annual spend and satisfaction ratings.

We found some stark differences in how automation leaders and slow adopters utilize iPaaS in their operations. For one, automation leaders make larger investments in this technology, with a median annual spend of between $100K and $250K, compared with just $25K to $50K for slow adopters.

Along with this greater commitment, leaders reported much higher satisfaction scores with iPaaS—8.64 on a scale of 1 to 10, versus just 7.02 for slow adopters.

It’s clear that automation leaders see the potential in iPaaS.

Why? For one, automation leaders are particularly adept at understanding their organization’s strategic business goals and selecting the right automation tools to help meet these objectives. When it comes to iPaaS, this means leaders understand how this unique integration tool can be deployed effectively to connect the front and back office, helping to reduce the burden on IT staff and freeing up the team’s bandwidth to address strategic business goals like growing revenue and achieving digital transformation.

Leaders also recognize that iPaaS is a useful tool not only for connecting the front and back office, but also for introducing automation to the front office. iPaaS puts automation in the hands of business users rather than requiring support from developers. Beyond freeing up bandwidth, this directly contributes to meeting strategic objectives like improved customer experiences by living up to customers’ real-time expectations.

Traditionally, organizations have implemented automation first in the back office before gradually expanding it to customer-facing departments—if ever. Now, that dynamic appears to be flipping. And the growing use of tools like iPaaS is evidence of that.

Leaders also understand how to maximize the ROI of their automation investments by employing flexible, versatile tools like WLA, iPaaS, and BPA to achieve comprehensive, end-to-end automation. As the talent shortage grows ever-tighter, customer expectations rise, and real-time integration across environments becomes a more pivotal piece of the transformation puzzle, automation leaders’ approach to iPaaS will necessarily spread across the financial services industry.

From data analytics to compliance and beyond: Where iPaaS fits into financial services

Success in business automation is often a case of matching the right tool with the job at hand. Although there are numerous opportunities for iPaaS to be used in financial services, the solution is the best pick for use cases where:

• A process has one or more steps that need to trigger additional actions

• A piece of data needs to be propagated to multiple places

• Events must be reacted to in real time

• Business units seek greater control over implementing their own automation

For example, an iPaaS solution can be used to accelerate payment processing by seamlessly integrating payment gateways, core banking systems, and e-commerce platforms. This ensures that real-time payments are processed smoothly, and merchants get paid on time and accurately.

Another use case is in data analytics and business intelligence integration. An iPaaS solution can connect such systems to enable financial services organizations to gain insights into customer or member behavior, enhance reporting, and improve risk analysis.

iPaaS solutions can also streamline cross-border transactions by integrating currency exchange platforms, international payment networks, and core banking systems, ensuring accuracy in transactions and compliance with foreign exchange regulations.

Lastly, iPaaS solutions are often used to assist financial institutions in integrating regulatory reporting systems with their core banking systems. This ensures timely and accurate reporting to regulatory authorities, helping organizations comply with industry regulations such as Basel III, Dodd-Frank, and GDPR.

Accelerate the journey to a more connected future

iPaaS is a unique, emerging automation technology that offers great potential for integrating diverse systems—particularly those that reside in the cloud. It can serve an important role as a key component of a comprehensive, end-to-end automation suite, and help financial services organizations streamline their operations, provide better customer service, and achieve strategic business objectives.

Gain insights about how your financial services peers are using automation today to streamline processes throughout the organization and achieve higher-level business goals in the State of Automation in Financial Services 2024 Report. And to learn more about how to effectively deploy an end-to-end automation solution in your organization, contact the financial services automation experts at SMA.