Open Banking APIs are a relatively recent addition to the financial sphere — but they are integral for innovation in the digital age. Is it possible to benefit from an API without a cohesive strategy? Here, we consider the opportunities that API integrations can offer banks of all sizes.
What is an API strategy?
Banking APIs (Application Programming Interfaces) allow financial service providers to access a customer’s financial data in a secure, authorised way. As well as helping third party Fintech apps and other financial institutions, APIs allow banks to provide better digital services.
Increasingly, customers prefer using internet banking and apps rather than visiting physical branches. With a predicted 2.5 billion people using digital banking by 2024, harnessing API potential is vital to remain relevant and competitive.
However, while it’s all well and good for banks to expose an API (allow other systems to retrieve information) for compliance, more is needed to get financial reward out of Open Banking.
It’s important to see your APIs as a product and establish an API strategy that unites IT and business teams.
3 reasons to develop a strong API strategy
With that in mind, how exactly can an API strategy benefit banks?
1. Identify the right partners
Exposing APIs can help you expand your reach, allowing you to find new market segments and increase customer conversions. After all, why visit a bank when you can access savings, lending, insurance, pensions, and other financial services on an app?
However, it’s essential to find the right Fintech partners in order to monetise your APIs effectively. Having a strong API strategy will help you work out which partners will benefit your bank and bring in revenue. Exposing APIs without a good strategy can lead to wasted time and money — you may find you have to backtrack and try again. Thorough market research and ensuring your business and tech teams work constructively together will yield the best results.
2. Find new opportunities and accelerate innovation
As well as reaching new customers, an API strategy will help identify new opportunities and use cases in an ever-changing market.
New APIs are constantly evolving. Knowing how to manage, track, and refine your API integrations and goals will help you find new ways to monetise and stay ahead of the competition. A good strategy can also accelerate speed-to-market.
3. Develop new business models
Bank as a Platform (BaaP), Bank as a Service (BaaS), and Beyond Banking, are all routes you could explore with an effective API strategy. On their own, APIs won’t cut it — you need to know how to use the technology to your advantage.
Again, these streams will help reach new customers and Fintech partners in a profitable way. You could, for instance, offer invoicing or payroll solutions — something that traditional banking lacks but is highly desired by businesses.
What does it involve?
A good API strategy includes:
- Defining your API goals (and knowing what your customers want)
- Aligning your business and IT teams
- Building an API roadmap that stakeholders can visualise
- Determining KPIs
- Robust testing
- Managing, tracking, and refining
Do you need a better API strategy?
Getting the most out of the API economy involves more than just exposing APIs. Every day, customers are faced with Fintech companies vying for their attention. Knowing how to use Open Banking to your advantage can give you a competitive edge.
To reach your innovative potential, you need to consider the evolving market, set goals, and monitor progress. Fortunately, the Open Bank Project, led by TESOBE, can help accelerate your API journey. The Open Bank Project API Middleware Platform can help all banks engage with APIs to support growth and innovation. Get in touch for more information.