Free Your Data With Open APIs For Banking

Flashy fintech solutions promise to help financial services companies thrive in the digital economy. Although these innovative offerings are getting lots of news coverage, there is a quieter but more transformational shift emerging: a movement to free data from the proprietary applications that create, process, and store information.

Although these apps store terabytes of valuable data, the information is not traditionally available to third parties. Closed apps cannot be consumed by fintech solutions or used to make information available that might help financial services companies gain new insight or become more competitive.

One remedy for this problem is to use open application programming interfaces (APIs) that allow authorized applications to securely access this vital data. By making open APIs a core part of the banking information systems landscape, companies can take advantage of data assets in new and innovative ways. Firms can share data across siloed business applications, gaining a unified view of customers. With this view, banks can better understand customer behavior and desires and learn how to better meet customer needs.

It’s true that some banks already perform a makeshift version of this process. They may query multiple business systems, compile results to create a composite picture, and issue reports. But in the weeks it takes to gain this insight, organizations often miss the chance to take advantage of important yet fleeting business opportunities.

Quickly build essential services

By embracing a more open approach, firms can evolve their traditional infrastructures into an open API landscape that offer in-the-moment insight. Banks can pick and choose the services they want, even creating micro-services that can be published for consumption. When new needs arise, organizations can use micro-services as building blocks to create customized services that meet specific customer requirements.

A few leading financial services companies are already moving in this direction. To help create systems unbound from user interfaces, firms are asking for APIs that use OData, the open data access protocol, to build interoperable RESTful (Representational State Transfer) Web services.

Building this type of API-centric environment, organizations can consume these services on other banking platforms. For example, one firm has used open APIs that reside in their online channel to be called by another platform, reducing the need to duplicate entitlement definitions in two locations.  This is also especially helpful when a bank is trying to enforce global money movement limits across multiple channels.  By having the other systems call into the platform sharing limit information via API, the need to duplicate data is greatly reduced.

Take advantage of the opportunity

Thanks to new regulations and developing economies, the demand for open APIs will continue to grow. In the European Union, for example, the PSD2 directive is designed to let third parties access and use information stored by financial institutions. This regulation becomes fully effective in 2018, but many banks are beginning to investigate now. In markets without entrenched legacy systems – such as Pakistan, India, and Singapore – firms are rapidly embracing open APIs that will help make it easier for third parties to access valuable information.

By sharing data and supporting new micro-services, the open API movement will help banks offer more creative data-based services. Firms can join with their legacy software providers or work with other partners to develop new innovations that help improve the customer experience and gain revenues from existing data assets. Although the push for open APIs is just gaining traction, the opportunity to deliver better service and realize new competitive advantage are compelling reasons for banks to get started now.

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