An API Strategy for Open Banking

The use of APIs is fundamental to the concept of Open Banking. The need for new products and services to serve increasingly multichannel customers and create more personalized relationships requires the development of Open APIs.

Open Banking and the use of APIs is fundamental and not to be underestimated. Some banks have chosen to embrace concepts such as R&D and innovation incubation teams, unbundling monolithic IT systems into reusable service components and hackathons to spark innovation in order to gain that agility. This may address today’s concerns, but how can banks build for tomorrow with uncertainty on the technical standards that will be defined in months and years to come? As described with the Modernizers, the last thing that any technology leader wants is to have to rewrite a solution in three years’ time because the technology they implemented today isn’t fit for purpose in the short or medium term.

2. Contributing value to and from the API economy

The new ecosystem is comprised of not only financial institutions, but also retailers, high-tech companies, social media, crowdsourcing platforms, and potentially anything that involves financial information or transactions.

In this new ecosystem, APIs are a new channel for doing business and need to be given that importance. The monetization of the API economy presents a new source of revenue, but only if a bank’s APIs are adopted and used by other organizations and developers. They should be productized and marketed as a source of competitive advantage, like any other traditional product. There is no value in having the best banking platform if developers don’t want to open the front door. Successful APIs require healthy internal and external developer communities and so APIs also need to be easily found, understood, and used.

Banks need to both offer their services to be consumed by external third parties, but also think creatively how to use third-party services for their own offerings. Thriver banks will not only astutely open their own systems for others to consume but also look how to innovate and enrich their services by using other organization’s APIs.

3. Coping with increased, new and future demand

Requirements for API platforms are numerous and future generations of customers will make new demands on these platforms that are unclear today. They must support security measures such as encryption, strong customer authentication and auditing to keep financial transactions and information secure. 

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