Delivering Transparent and Integrated Banking with APIs
Maurizio Canton, EMEA CTO, TIBCO Software
While financial services has traditionally been considered cautious in its adoption of new technology, the case for Application Programming Interfaces (APIs) is certainly growing in strength.
Improved service delivery and broader customer reach are but two of the benefits already being enjoyed by banks who have made the leap to API adoption. Such benefits provide real evidence that APIs are making the banking vision of ‘anywhere, anytime’ a reality for today’s ever-increasing population of mobile customers.
Undoubtedly it is APIs that have helped to facilitate single view, real-time access to banking information. This in turn has empowered customers to take control of their financial decisions, building trust and improved relationships, which ultimately results in loyalty and increased sales.
It now appears that this relationship is set to further blossom, thanks to PSD2 and the Third Party Payment component signalling the mandatory introduction of open APIs in banks.
The next logical step from the original Directive of Payment Services (PSD), PSD2 continues the European Commission’s efforts to foster innovation and a more inclusive way of working across the banking sector. But what does this mean? In an effort to achieve this integration and improved service delivery, payment processing services and customer accounts held by the bank will be opened up to the industry. As such, open APIs will allow permitted third parties to access key information such as banking products and customer account data.
It is thought that the benefits of such an API approach have multiple and mutual benefits to both the banks and customers, not least that a more transparent, single payments market across Europe with enhanced security around internet payment and account access, will drive greater cohesion and integration.
The possible applications are simply too many to count. Consider the benefits of a mortgage provider with access to a customer’s transactional data. This information can easily be used to provide an instant view on mortgages that are both available and affordable to the customer. Or perhaps an application where a financial management tool, fuelled by greater data insight, can monitor an individual’s spending and provide feedback and alerts in real time. It is this type of forward-thinking application that could have a significant impact on helping customers to better manage their own finances.
While it may appear to be the nirvana of integrated banking, there are of course some fears, most notably around loss of control. However, PSD2 remains a pending legal obligation. Banks and customers must come to terms with it, and they do have a choice. Banks can approach it reluctantly with a mindset of ‘unavoidable compliance’ or they can chose to embrace it. The latter will allow them to capitalise on the opportunities to increase revenue potential generated through added value data and the ability to evolve a particular offering to the millions already registered via APIs.
Whether to approach reluctantly or fully embrace isn’t the only question for the banks. Selecting the right underlying platform will be critical, as APIs developed for PSD2 are unlikely to be a routine internal IT management issue for the bank. It is more likely that complex commercial decisions will be required about a new technology, different to the bank’s traditional own-brand products.
The legacy culture
Moving to an API-driven architecture is no simple task and will demand the banks employ a new approach to their IT infrastructure. The challenge for those banks operating with legacy systems and architecture could be immense.
Looking to assist banks with this challenge, the latest breed of API management solutions that can cover the entire API lifecycle, will increasingly come into their own. The best of which will enable users to create, integrate and manage APIs inbuilt within a single cloud-based offering, providing ease of use, optimal visibility and will come with inbuilt security and analytics features. However, the additional support from a team with the experience and knowledge to guide through the issues that arise during this process, should not be underestimated.
The journey towards delivering improved transparency and integrated banking may not be simple, but is certainly a worthwhile one. The key pre-requisite is for an API platform as sophisticated as the APIs themselves. This will help to drive integration with the channel and trading partners, and will become an essential tool in ensuring that the banks’ response to PSD2 goes beyond simply compliance. The reward is much greater than compliance alone, as banks can move to fully evolve their digital business.
As TIBCO CTO of the EMEA region, Maurizio will ensure consistency of technology vision, provide strategic sales support and support for AR, PR, marketing and M&A initiatives, as well as serve as a conduit for the Global CTO function. Maurizio has more than 25 years’ experience in IT working for several software vendors, such as TIBCO Software, IBM, Siebel, SOA Software and Red Hat. He has had several European roles covering pre-sales/sales, marketing and HW/SW engineering. In TIBCO¹s earliest years, Maurizio was the only person in Europe supporting mainframe technology before moving to be a very successful Solution Consultant in the Financial Market in the UK. He was also part of the Composite Application Group (CAG) team supporting TIBCO¹s SOA, BPM Infrastructure and Governance in Europe and worldwide.