What’s all the fuss about?
While some banks view the opening up of their data as a threat, there's no doubt that open banking through APIs has the potential to provide fantastic customer benefits. From advice and offers to frictionless payments and financial management from a single location, new products and services can be delivered that previously were impossible.
Why should banks care?
Open banking presents the opportunity to deliver exceptional customer experiences, and increase customer satisfaction. If banks don't use APIs to their advantage, they risk going the way of the Telcos and becoming ‘dumb pipes.’ But if they're smart and connect with other providers, they can leverage their customers' trust while providing new, seamless experiences.
In episode 202 of FinTech Insider, guest host Ghela Boskovich neatly sums this up:
A selection of early initiatives
BBVA – API Market
This Spanish bank has grabbed the bull by the horns and exposed a range of APIs to approved developers
well ahead of the regulatory timescales in their home market.
APIs are available for:
- Customer profile data
- Key account data
- Money transfer services
- Aggregated card purchase data
- Pre-approved loans
Capital One – Developer Exchange
The credit card giant currently has four API products accessible to approved developers on their Dev Exchange
, including rewards, credit card offers, and a security API. Keen to be seen as an early mover, the bank launched this site in spring 2016, came out of beta in December 2016, and has a lively and active developer base. Developers can make use of the sandbox, and there are regular meetups and events.
It’s a three-step process for developers to get involved – sign up and register an app, actually build the app, and finally request product access and go live.
HSBC – Developer Portal
HSBC was the first of the large UK banks to satisfy the requirements for publishing APIs for their public data, having launched a developer portal
at the end of 2016. Here software developers can gain access to APIs for a branch / ATM locator, as well as product information for personal and business customers.
On its website, HSBC says that the secure sharing of data with other banks and businesses “is nothing short of a revolution in banking and will change the face of financial services forever
M-PESA – New Business Models
M-PESA is one of the great financial inclusion success stories, having given millions of people the ability to transfer money in parts of the world where previously this was incredibly difficult. The service has grown beyond simple mobile money transfers to allowing customers to pay for a range of products and services directly from their phones, whether it's a TV subscription, utility bill, or beer in a bar. All made possible through APIs.
In episode 203 of FinTech Insider, Leslie-Ann Vaughan explained how M-PESA used an API to enable a remarkable higher-purchase mechanism for customers of M-KOPA in Kenya, Tanzania, and Uganda that literally ‘keeps the lights on’:
Watch the fascinating interview with Leslie-Ann here
Fidor – Banking as a Platform
Fidor stands out for being PSD2-compliant for more than two years. Placing open APIs at the centre of their strategy, Fidor firmly believes in a future where banks act as a platform that offers an app store experience for customers to pick and choose the services they want to consume. They are more like a tech company that just so happens to have a banking license.
With an active developer community, the open standards they’ve adopted mean that it’s very easy for their customers – the developers – to build, plug in, and launch new services via their APIs.
Transferwise – International Payments
Transferwise took advantage of an area of banking where customers have historically been poorly served – international payments. With competition that had lengthy transfer delays, opaque pricing, and high fees, Transferwise quickly gained significant market share and now makes its service available to other banks via the API.
One bank that’s taken advantage of the Transferwise API is German neobank N26 – the image below was taken from the N26 app.
Zopa – P2P Lending
The UK P2P lender has an API programme that’s created partnerships with a broad range of businesses, from brokers and affiliates to retailers and banks. Notable partnerships include Metro Bank, which is using Zopa’s API to lend money alongside retail investors. This allows them to lend money outside their branch catchment areas. Airbnb hosts can include their rental income when calculating the cost of borrowing thanks to the API.
Other notable initiatives
The banks and FinTechs offering access to their APIs is growing each month. Other notable initiatives include:
Credit Agricole opened up its APIs way back in 2013 and now provides an app store of banking related apps.
Monzo lets developers play around with their own data and publish what they build to the community
Braintree and Stripe use APIs to accept payments in your app or website, and they are already processing billions of pounds in payments. These guys really have raised the bar.
GoCardless offers a direct debit API to UK businesses.
While it is still early days and the vast majority of banks have yet to make any significant play in the API space, a number of organisations are dipping their toes in the water.
First movers amongst banks tend to launch invite-only portals. Payments and other ‘money movers’ are taking more of a lead, making their APIs open to all.
Some of these early initiatives may appear a little boring (or in some cases useless!), but banks are putting the infrastructure in place to do the big lifting later. They are forging relationships with developer communities and gaining valuable experience in this exciting new world of open banking.
Need help or guidance with your API strategy?
The 11:FS team
are experts at developing API strategies and taking existing ones to the next level. If you need help designing new user journeys, exploring new business models, or connecting with developers and startups to use your APIs, contact us at firstname.lastname@example.org
. You can also get the latest fintech news and even deeper insights from our podcast Fintech Insider