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An API-first approach will revolutionize Financial Services

Carlos Oliveira Carlos Oliveira on 1 April 2019
4 minute read

Whatever business you’re in, you know perfectly well the new realities of commerce: customers expect sophisticated services across the digital domain. Markets and competitors change at internet speed – while legacy IT infrastructure does not. And data is the electricity that flows through it all: difficult to control but also immensely powerful.

Controlling data is modern commerce’s greatest challenge, particularly in the rapidly changing financial services sector. Building smart controls that can extract, filter and combine data to feed business logic, frees developers to mix and match sources quickly and reliably. Those controls are APIs. They handle the complexities of each data source, hiding the mechanical details of access and control, and translate data to a common format.

Once a common API or network of APIs has been created for data sources, any conceivable application or service can be built to that API.

How does that work in practice?

Consider the commercial environment facing a typical up-and-coming fintech company. Thinking with APIs helps such a business get ahead of the market. Hundreds of new, technology-based firms are starting up every year, and they are giving more established competitors a run for their money. The lesson is clear: APIs are driving business growth today, and companies that don’t embrace that trend will fall behind.

Challenges and answers in digital finance

Today’s customers know what they want, and are no longer resistant to changing their financial services providers. BAI reports that from millennials to baby boomers, customers expect a highly consistent omnichannel experience above all. They’re also looking for an emphasis on mobile, highly usable tools for customization, and a way to bring together the information and services they want.

Meanwhile, financial service providers are keen to analyze customer data so they can come up with new ideas and customize offers and services for more personalized customer experiences.

What resources do organizations have to help make this happen? As the old maxim says, you fight with the army you have, not the army you want. Think about any financial business: their existing technical estate likely includes many different data stores from CRM to email, and the company’s development process may be anywhere along the pathway from waterfall to DevOps. They also have to consider performance, compliance and security. But the customer doesn’t care about any of this. The customer just wants their financial services provider to be seamless, efficient and easy to use.

Management of these elements is done by APIs, effectively breaking them down into optimal logical components that can be connected and reused in the simplest possible way.

Say you have a new product and want to target a specific demographic of people, if you have built APIs across your data sources that work in a consistent way, then your new product developers need only learn that once. Using a new data source takes seconds.

Such capabilities are useful for organizations of any size. But they can be especially valuable for small and medium-sized businesses looking to remain competitive against larger companies with far greater available resources.

APIs enable more than just speed and efficiency

When financial organizations adopt an API-first mindset, they also gain other benefits as well:

1) Democratizing innovation

Because APIs hide complexity, they create simple, abstract concepts that anyone can grasp and use in what-if thinking, even if they’re not programmers. Using tools as simple as pencil and paper, or codeless graphical design software, anyone with sector expertise in a company can sketch out how to build a system around data that can address a need or offer a brand-new idea. This can be invaluable across financial services, where customers’ needs are ever changing.

Far too often in all business, a lot of valuable information and experience is never used because IT is seen as a disabler rather than an enabler. APIs don’t cure this entirely but they do offer a path through it.

2) Opening up new data sources

There are well over 20,000 open sources of data available online through APIs, and that number has been growing by around 15 new APIs per day.

These APIs provide data from every category of source: geographic, social media, weather, advertising, economics and so on. They also provide a signpost to how the future is shaping up, especially in finance. For example, the emergence of Open Banking – built on open APIs – is driving a lot of new thinking at every level of financial services.

3) Opening up new business models

Once a company has built internal APIs that make data accessible to new ideas and services, it’s a small step to making some of that data available to external interests. Any company that is successful in a market has a high degree of current knowledge of that sector, often locked up in data sets across many sources. Other businesses could become new markets for that knowledge, using it either for their own internal purposes or as part of a partnership or joint enterprise. APIs offer a simple, standard, secure and highly usable route to explore these ideas and find new ways to sell what a company does.

Where next?

Quickly connecting multiple applications and data sources is a significant operational benefit for financial services companies, but building innovative digital platforms is truly transformational.

By connecting your own legacy systems with third party data and cloud applications, you may aggregate information flows and create new services, like market updates, from your own digital platforms. This could deliver value to customers with the potential to generate new revenue opportunities.

APIs are now at the center of innovation creation and also help to enforce the ontology and data standards throughout an organization. This in turn demonstrates the importance of financial services embracing APIs to help solve their key integration challenges, as well as automating and streamlining data operations.

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Author
Carlos Oliveira
Author
Carlos Oliveira

Founder of SPINR, Carlos has been advocating how the use of a SOA approach based around API’s can provide the platform for true digital transformation. Aside from SPINR he is also the Chair of the techUK Local Public Services Committe that aims to improve the engagment between the public sector and the IT industry.

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API-first approach for financial services

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