Revolution banking: the challenge of open APIs in finance

Revolution banking: the challenge of open APIs in finance
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BBVA API Market

Financial institutions have been using APIs for some time now, either in internal applications or to connect to third parties in a substantially controlled, limited-access environment. The challenge consists of the mass use of these open APIs. What possibilities do these APIs offer? Are they able to design business models to develop new products?

The discussion around APIs was the topic of one of the sessions, boosted by Manuel Rodriguez Lopez, director of Technology Consulting Atmira: What is the potential of Open APIs for banking?) at Revolution Banking. José Manuel de la Chica, BBVA, said: “The best technology solution to be able to open banking data is APIs. This is a mature and consolidated sector. In fact, 120 new APIs are created every week. Making APIs open, public, is the best way of growing. And at the banks we can’t miss this train.” Since BBVA API Market companies can access a number of APIs to develop new business.

Xavi Gassó i Lorido, Banc Sabadell, stressed how customers trust banks to promote APIs. “APIs are not a threat to banks. We offer security and trust to our customers and want to become partners of the new players. This partnership is mostly based on APIs, specifically open APIs. We are looking into the fintech sector since it integrates with our services and we provide access to a very large group of customers that fintech companies would really struggle to reach.”

Federico Caro del Moral, Bankinter, pointed out that digital transformation is a requirement rather than an option for banks. “Digital transformation is affecting the banks’ income statement. Our response must be openness and collaboration, the creation of an ecosystem. We need to be open in all areas.” As an example, he mentioned the project of the German digital bank Number 26.

Eduardo Fernández, Isban (Santander Group), said that there is still some fear: “For large banks, this means opening the gates to a private realm but it’s true that open APIs represent a challenge – ensuring good quality, and the underlying structure needs to be ordered.”

In his opinion, “having good open APIs means having travelled along a very interesting path. It involves a quality challenge that is overcome with bottom-up investment. It’s an excuse to transform from the inside out.” And he added that they need to think not only of APIs that have a direct link to the banking system; they also need to focus on APIs from the world of data, since these APIs “are very valuable and may pose less of a challenge to our traditional business and offer alternative ways of doing business without having to compete with our traditional view of banking.”

How do banks handle this transformation?

According to De la Chica, BBVA, until now a transition has been taking place albeit financial institutions are currently becoming platforms. “We can’t be left behind. We need to turn a traditional business into a platform as a service (PaaS) for our customers but also for other parties that will work with us and are far from the traditional roles.”

In this context, he said that they used to have suppliers, consumers and customers and “now the concept of partner has become blurred; it may mean our supplier, a customer or even our next-door bank or a startup just in front.”

De la Chica pointed out that one of the advantages of APIs is the fact that “some consumers add value to them and then sell them again. In this cycle, consumers become producers.”

Gassó i Lorido, Banco Sabadell, said that now that each institution has worked on and designed its own API it is the time to share the results. The Bankinter representative stressed that “being open equals ruthless requirements. You need to expose your business very clearly in your API and this is not easy.”

In turn, the representative of Banco Santander explained that, thanks to mobile banking, institutions have been changing a lot over the last few years. They are technologically mature and now “it’s not a matter of creating thousands of APIs but rather dozens. We need to understand what we wish to sell and expose. We don’t need to turn the entire banking core into APIs.”

And once you know what you wish to offer your customers, José Manuel de la Chica emphasized that you need to think about the customer. “We’re talking about a double customer: when we expose open APIs, we are offering a Business to Business to Consumer business model. We establish relationships with intermediaries – developers, startups, fintechs and even competitors – but there is an additional under-layer, i.e. the end user that will use the application.”

De la Chica clarified that this model must offer double value: “We must know what developers, startups and API consumers need from us and also what customers are asking of developers.”

According to De la Chica, APIs need to be offered in as simple a fashion as possible. “We know that developers and startups which use APIs don’t limit themselves to only one API. On average they use around six and, as a result, integration of applications with these APIs must be as intuitive as possible and must not be a traumatic experience for developers.”

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