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Standards: the key to making APIs the new normal in banking

Standards: the key to making APIs the new normal in banking

7 January 2019

What is the value of open APIs to the financial services industry? What are their advantages, and how can they be exploited most effectively?

David Bannister, principal analyst in the financial services technology team at Ovum, summarised the consultancy firm’s recent research as he introduced the session ‘Open APIs on SWIFT: Is this the new normal?’ at Sibos last year.

“We found that consumer banks were less enthusiastic about open banking and APIs because they saw them as regulatory or compliance activity, but our latest research shows that 91% of North American corporates are developing open APIs for third parties, compared to 67% a year ago.” Bannister said.

In Europe in particular, APIs are often discussed in the context of regulatory requirements to open up services to competition, specifically under the second Payment Services Directive. Bannister went on to say there was no regulatory mandate to account for the interest of those US banks. The session explored the benefits of APIs, and the factors underlying their use, focusing first on use cases.

Responding to growing client interest

Robin Leary, director of global standards and SWIFT product development at Citi, gave a securities perspective.

“We’re starting to see requests from our clients around using APIs,” he said. “That analysis is ongoing, but we do see some advantages of using them. There might be manual processes we have in place; there might be information and data that need to be shared, and they might not be covered by ISO standard messaging, for example.”

The panel then discussed the potential for APIs to achieve a richer engagement between remote systems than is feasible with messaging, and the scope for using APIs as part of a process-improvement strategy.

Paul Franklin, General Manager, Payments, National Australia Bank, said: “We’re also seeing a lot of demand from corporate customers; with the New Payments Platform they want to be able to send us fast payments regularly. The traditional channels that allowed the transmission of a batch file are not really suitable for that fast-paced environment.”

APIs may also prove useful where an external party is seeking access to their own data within a large target data set. Mr Franklin said: “APIs allow us to determine what data we want to deliver on each occasion; is the requestor entitled to it? That’s something that pre-programmed messages are not best suited to do.” Mr Franklin pointed out that National Australia Bank was the first bank in the world to use APIs to integrate to SWIFT’s gpi Tracker.

SWIFT’s role in the API ecosystem

With such diverse use cases established, how is SWIFT supporting banks’ use of APIs? Bannister turned to Max Ratchkauskas, head of API strategy, SWIFT.

“We play different roles. There are the SWIFT services and data that we want to expose through APIs, but also, SWIFT’s role is to help the community. In this respect, there is the whole issue of standardisation of APIs, and how we can harmonise across the community,” Ratchkauskas said.

“If you are part of an ecosystem, it’s important to standardise, so that your consumers are not programming every time for a different API for the same thing.”

In October, SWIFT published a blueprint for common API standards following collaboration with European banking standards bodies, STET and Berlin Group NextGenPSD2, who represent European banks and payment service providers. The white paper, ‘Towards a global platform for the Financial Services API economy’, posits that a successful transition to an API-based financial system is only possible if standards bodies converge towards a shared methodology for standardisation.

David Andrzejek of Google Cloud’s Apigee team offered a perspective from outside the finance industry. “The world is moving to software. Everybody needs to up their game in their software experiences. All those great software experiences are built on APIs. One piece of software talks to another piece of software over APIs,” he said. If this suggested that outside finance, APIs were already the established normal, Andrzejek acknowledged that banks have been innovative recently in their use of APIs to build new experiences and communicate with partners in a “rich, efficient way”.

The world is moving to software. Everybody needs to up their game in their software experiences.

David Andrzejek, Google Cloud’s Apigee team

The panel went on to discuss innovation via APIs, and the need to compete via innovation. Here, Andrzejek delivered a thought-provoking analysis of API usage in other sectors. Citing examples from online retail, mobile telephony and technology, Andrzejek concluded: “APIs are a competitive weapon in the market. They are also a response to disruption.”

APIs can be used to enhance the customer experience and to deliver richer communication: tool, as the panel described, for both “keeping up” and “getting ahead”.