APIs Disrupting the Financial Industry

25 Sep 15

I have just returned from API Days London, an event focused on the Banking and Fintech industries. The event discussed today’s various financial services business cases and technical best practices and the overall theme of the day was, “what’s that coming over the hill? Is it a monster? No, it’s banking APIs.” Nice to see some humor injected into a techie event!

Overall the event was fascinating and such an eye opener to the constant changes occurring all around us as technology evolves. Three main things came out of the event for me and I want to discuss those in more detail:

APIs – The Time is Now

Simon Redfern of the Open Bank Project made an interesting comparison with the initial adoption of websites, “In 1995 organizations questioned whether they should have a website or not; by 2005 the answer was ‘of course we have a website!”

The same question was being asked of Banking APIs back in 2005 and now it’s accepted that banks must expose their core banking services via an API and allow the community of developers and start-ups to consume those services to offer new and unique ways of interacting with customers. If they don’t they will die.

This change is not only being driven by challenger banks without the legacy of mainframe based systems to maintain customers, but also through regulation. For example, the Payment Services Directive 2 (PSD2) standards currently being defined by Brussels will force banks to allow third party access to accounts and payments and foster competition.

Embrace Your Consumers – Go Digital

Kristen Moyer from Gartner highlighted that pretty much every bank and financial organization has plans, or ambitions, to “go digital”, but unless they change their business model to support it they will struggle. However, as many of the banks at the event stated, changing a tried, trusted and working business model is a huge risk for them.

Mondo, Lloyds, Ulster Bank, Erste Bank, BNPP and RBS were all represented at the event and all had embraced APIs – albeit perhaps at different rates with different objectives. The traditional banks brought some real-world experience to the table, stating that “going digital” is not just a technical challenge – it is a people and resources challenge.

Fundamentally, the purpose of adopting APIs is to enable them to focus on the entire “customer journey” and put the customer first. Without looking at the entire context of what customers are doing when they consume banking services, it is hard, if not impossible, to “delight” the customer by just focusing on pure banking services. However, wrap those services with retail opportunities, funky branding, personalized and relevant content, recommendations, or social communities of like-minded people and the customer finds the whole experience more useful, and feels more valued.

Embrace the Developer

An overwhelmingly important theme that was covered by the majority of speakers throughout the day was the importance of the developer as a customer. Banking APIs means that banks have, effectively, a new and different type of customer to embrace – the developer. By exposing services as APIs, it is developers who will be interacting with the traditional banking customer. To grow the number of banking customers, banks need to encourage developers to use their APIs instead of someone else, and that means enabling them to make money as well as making the APIs easy to use.

They need to embrace the new digital world and monetize their APIs to create ‘banking marketplaces’ similar to the app stores for apps. This must enable third parties to make money, as well as the bank. Those third parties can rapidly innovate their front-end experiences, perhaps ultimately even creating a banking front end that serves just one customer – but one that is finely tune to that one customer’s requirements, yet still generates a profit for both the developer and the bank.


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