The power of open APIs in banking domain

The word “OPEN” is captivating the attention of many financial players to yield a better customer experience and simplify the banking process to shake off the risks involved. Almost every financial institution embraces ‘Open Banking,’ Open APIs,’ and ‘Open Finance,’ but what do these buzzwords mean?

As we have already covered Open Finance and Open Banking concepts in our last blogs, let’s uncover the details about Open APIs. Open APIs is an application programming interface made publicly available to external parties to drive innovative and collaborative partnerships and enable banks to leverage their existing infrastructure and data to unveil new opportunities.

With the help of increased API connectivity between third-party firms and financial institutions, it has become easier to drive innovative and collaborative partnerships by leveraging the existing data and infrastructure to unlock new potential opportunities. As Open Banking grows, Open APIs have become the principal component of digital strategies to grow in a financial ecosystem.

According to the reports of March 2022 exhibiting API Performance Stats, Open APIs are driving business values:

These are deemed the essential technology enabler for banking-as-a-platform, application integration, innovation, and customer connectivity.

Drivers of rapid adoption of open APIs:

Multiple evolutions in the banking industry drive the rapid adoption of open banking:

Customer Centricity:

Over time, the customer's demands are changing rapidly to experience multi-and-cross-payment networks which are real-time and 24*7 available. Earlier, solutions were based on the product-oriented approach. However, services and products are now offered to provide 360° holistic personal finance management, including assets & liabilities held at other financial institutions.

Regulatory Norms:

Europe reasonably claims to be the 'cradle of Open Banking - after all, PSD2 and the UK's Open Banking Standard pioneered it. However, open banking and open API initiatives are popping up worldwide by imposing banks to allow third parties to retrieve the customer's information directly to yield a better and innovative experience.

Architectural Designs:

In the fast-moving digital banking world, the traditional architectural designs, composed of monolithic legacy systems, are evolving. Banks are, therefore, plunging to build full end-to-end financial solutions tailored to meet customer needs. And when the microservices contact each other via well-defined open APIs, the architecture is exposed to the world much quicker and cheaper than a traditionally designed solution.

Generally, this API ecosystem digital platform operates as an ”Application store” where services are provided according to the involved parties’ requirements. The customers sit in the driving seat to pick and choose the user interface, functionality, and services that suit them.

As soon as the customer made his choice, he would need to give consent to a third party like fintechs to work on his demands without impacting his financial data in terms of cost, performance, and convenience.

Opportunities for the Banking industry with Open APIs

The birth of the Open APIs ecosystem is a benediction for the banking industry due to its several opportunities. Financial institutions that are still inactive in this domain are expected to lose their market endeavours. As it is wisely quoted that an organization without Open API is like a phone without a Simcard.

Data sharing

Traditionally, the banking industry was quite slow to integrate the new technology and services. The evolution of API has enabled banks and customers to access all the banking services data in real-time. Additionally, customers can draw a clear comparison and reap greater savings.

Bespoke payments’ service:

Open APIs and open banking has provided financial institutions the innovative solution to provide a bespoke experience matched to each individual. Now, the large banks offer a wide spectrum of financial offerings avoiding the customer having to shop for each financial product/service.

Successful API Strategy with ECS Fin

Most banking services are built on legacy systems that are not customary to the current digital requirements, leading to lengthy and costly change cycles experience. Building a successful API strategy to refurnish all the wicked API connectivity is mandatory to create new revenue streams. IMS solutions are open and collaborative platforms for financial solutions which can be leveraged using open APIs to access core systems across the banking market: retail banking, payments, lending, corporate banking and treasury & capital markets.