For the UK financial services sector, Application Programme Interfaces are big news right now. Yet firms are still missing these big opportunities for digital transformation.
For firms in the UK financial services sector, Application Programme Interfaces (API) are big news right now. But I’m concerned there is also a risk that the big opportunity APIs offer, to develop new strategies and genuinely transform businesses, is being missed.
At the start of the year, we saw the launch of Open Banking which, in theory, allows firms of all types and sizes to tap into the customer data held by Britain’s largest banks using – that’s right – APIs.
Coupled with the European Commission’s EU FinTech action plan backing open banking – suggesting that work being done to enable third party access rights under PSD2 could be developed to enable similar levels of access to a wider range of financial accounts in future – has the financial services industry in the UK got a firm grasp on the potential APIs are able to offer them? And the possible business model opportunity they present?
I’m not sure that is really the case.
Of course, this kind of technology is nothing new. Financial services companies’ IT departments have been using APIs for years to allow different parts of their businesses to interact with each other.
But, where organisations – especially those in the financial services sector – are going wrong, is in failing to understand the API is the technology that will allow them to reshape their strategic vision and create a business which can both survive the current changes in the industry and also make the most of long-term growth opportunities.
In too many companies, APIs remain the preserve of technologists and IT departments: this is why so many firms remain wedded to what can be described as bottom-up or technology-up thinking – and don’t see APIs as the true digital asset power platforms they can be.
To take one example, think about the trade finance function in a major bank: in the past they’ve provided credit for clients who want to sell overseas. But, if those clients need to ship their product, they go to a logistics provider; if they are looking for insurance, they speak to a trade insurance house.
Reimagine for a second, a bank offering all those services in one place. As with Uber, the business customer of the future could press a single button to transact overseas and everything else will follow. Consider the growth opportunities available to a company that could offer this kind of service.
Recently, I’ve been speaking to colleagues at a business called Apigee – an API technology developer that was bought by Google for $625 million a couple of years ago. Talking to them, it has become apparent that the humble API is not just a connector of systems, it's actually a new way of thinking about how to create new business models and new services for customers.
And think of the data analytics possibilities with data on an integrated, cloud-based API system – a valuable source of insight for brownfield transformation and greenfield opportunities.
In the same way that the energy industry has embraced shared infrastructure – is it time for the National Grid for Financial Services?