By, Victor Zhiltsov – Senior Director, Visa Developer Platform
In the fast paced world of innovation some say it is now easier than ever to become irrelevant.
How do we use open APIs to stay in the game and to build the next generation of products and services for the financial services industry?
“What was once unthinkable is now fashionable: a bank exposing its proprietary software to outside developers” those were the opening words of an article in 2015 by AmericanBanker. Fast forward to fall of 2016 and we can confidently say that Open APIs have grown to become essential for continuous innovation and product development in the financial services industry.
The world of innovation is incredibly fast paced, and it is no longer possible to keep up, if we plan to ‘own’ every layer that makes up our products. We need to rely on services from other companies, our partners, or even competitors. While this may sound counterintuitive, there is no other alternative, as missing out on the innovation trends is equivalent to becoming irrelevant in the marketplace.
A visible trend in the banking industry is the proliferation of digital and mobile products. The expectations of a modern consumer have changed dramatically over the last few years, and consumers are asking for services that are more personalized, faster, cheaper, and more easily accessible. The queues at the retail branches are getting smaller, and the younger consumers wouldn’t even comprehend a bank that doesn’t have an app.
Banks are moving fast to respond to this trend, and consumer-facing banking apps are coming to marketplaces by the loads. Some banks are faster than others, but my conversations with our clients have definitely shifted from ‘why do I need an app’ to ‘what features will differentiate my app from all others’. As such, it is no longer enough to offer an app with basic account-based services (look up my balance, view my transactions, deposit my checks, etc.), the app competition has moved on to more innovative features.
APPs and APIs
A good example of the next generation banking app feature is Consumer Transaction Controls. Let the consumer be in charge of their spending patterns, let them turn off the card, and turn it back on as often as they like. Or, maybe, let the parents control what type of transactions are allowed on the kid’s card. Features like consumer transaction controls are not easy to implement though. Very few banks control transaction flow from start to finish, and even then, making changes to the core payment processing systems is usually a complex planning exercise. This is a perfect example of the reason for Open API collaboration. Instead of budgeting a multi-year roadmap with a processing host, find someone who might have implemented this already, and has offered this as an Open API.
APIs and Bots
Consumer Controls is just one example, and there are countless others. More innovative and forward-looking features include open APIs from non-banking partners, like social networking sites. The social channel opens up a new world of opportunities to interact with the consumer. Traditional user interfaces (apps or websites) will likely be replaced with more intuitive, contextual, ways to interact with the consumer. Message bots or automated personal assistants, for example, will be able to respond to consumer questions in the context of a conversation, right when it is most relevant to the consumer. So, the concept of pulling up a laptop to log in to a website to look up an account balance will become irrelevant, when a message bot can answer that question right on the spot, addressing it in the context of a conversation that you are already having. Services such as this will not be possible to implement without Open APIs, and they will require contribution from many players: a bank, a social channel provider, a message app provider, an automated personal assistant provider, and others.
Looking at the ever-growing list of options to interact with the consumer, one might ask: where does this end? There are web sites, apps, social sites, message bots, automated assistants, voice UI devices (, the Internet of Things… The answer is simple – it doesn’t end, and the list will keep on growing in the most unexpected ways. Open APIs is the only way to play in this new field, and so, the first step to keeping up, is to offer your services as Open APIs, hoping that the developers will find interesting ways to present your services to the end consumer. The second step to keeping up, is to actively participate in the innovation and the API-based collaboration. This means assuming the role of a developer yourself, and connecting together services offered by various providers to add value to your own product. To explain this in more detail, in the next post, I will explore the concept of mash ups and API aggregators, which are Open APIs derivatives, of sorts.