About APIs, Open APIs and the Financial Market
Although, API (Application Programming Interface) could be seen as a very technical subject at first sight, it can also be presented in a business-friendly way, showing how companies can boost businesses and take advantage of that.
A software application built to attend an end user used to be designed to make the act of consumption easy, fast, simple and pleasant. Software doesn’t have eyes, emotions or intuition, and then it doesn’t need a user-friendly interface when it comes to the game to deliver service to another application. Nonetheless, as with a UI tailored to humans, software needs an interface that makes it easy to consume data and /or functionality.
An API is a set of stablished routines and standards (software) that allows the consumption of its functionalities by applications that do not intend to know or be involved in implementation aspects of the software itself, but solely use its services. APIs used to be discussed as being machine-readable interfaces (versus human-readable).
A good way of thinking about APIs is in the context of a wall socket. The electrical sockets found in the walls of homes and businesses are essentially interfaces to a service: the electricity that’s consumed by everything from our computers and smartphones to TVs, refrigerators, hair dryers and several others. The electricity is the service and each device that uses electricity is a consumer of that service.
Although they may differ depending on where they are in the world, electrical sockets have some patterns of openings into which electrical plugs that match those patterns fit and the service itself also conforms to certain specifications (e.g. in Brazil, most wall sockets deliver 110 (127 to be very precise) Volts of alternating current (AC)). This specification essentially sets an expectation on behalf of consuming devices. Likewise, an API specifies how software components should interact with each other.
“Behind the walls”
Through the standard interface, any compatible consumer can easily take advantage of necessary energy to supply its devices and for the consumer, simply does not matter what is happening on the other side of the wall, starting from simple things like the colour of the wiring in the walls to more complex “details” like how the electricity is generated (whether it be from a wind farm, nuclear plant, coal-fired generator , hydropower plant or solar array) or where those sources of power are located.
And in the other way around, the provider does not need to explain or present details of how services are being offered. In a tightly regulated market like financial services, it’s essentially good because data privacy, bank secrecy and sensitive personal information of accountholders will be kept “behind the walls”.
The standards for the API will be described and opened to any company or developer interested in using banking services through official documentation usually offered via a web portal.
In the financial services world, the services could be loans, insurance, e-commerce, payments, customer information, customer transaction history, authentication, wire transfers and so on, that can potentially be delivered from a wide range of compatible devices (i.e. smartphones apps) wherever it’s required by an end user.
A merchant that today offers their products and services can now offer an added value service, in a secure way to their customers, accelerating conversion and avoiding waiver.
In this new business model, a bank can expand their action range and increase revenue, but on the other hand the exposure of your brand will be lower or inexistent. It’s a business strategy to decide what’s worth depending on results expectation.
Critical factors for your decision
Getting back to security, APIs are commonly offered in three models: Private (Internal), Public (External) or Restrict (Partner). And once again, it depends on the company’s strategy. If the data to be exposed are very sensitive, it could be leading you to use a Private or Restrict app. Despite of being more profitable, this kind of API will not be easily maintained or enhanced. You will not have the support of the developers’ community likewise Public APIs.
Innovation, costs and security are critical factors to take into account for your decision.
The use of Open APIs fosters a customer-centric ecosystem and open innovation. As of today, more than 15,000 APIs (in the most variable market segments like financial services, government, mobile, transportation, education, science and others) are available at Programmable Web. Beyond information, guidance and useful reference, the portal also works not only as a directory for companies looking for APIs but also for developers and providers to offer them.
The Open Bank Project is an open source API and App store for banks that empowers financial institutions to securely and rapidly enhance their digital offerings using an ecosystem of 3rd party applications and services.
A very successful case of Open Banking APIs is BBVA API Market. With presence in more than 35 countries and using open and innovative strategies like mobile first, omni-channel and digital, BBVA has a wide set of products being offered in their portal.
The API economic possibilities are vast. Exploring this universe requires experience and technical capacity to undertake such projects and assist companies to take advantages from those benefits.