Financial APIs are booming. Swift’s Richard Tomusk, API Lifecycle Product Owner, looks at how financial institutions can make the most of this technology to deliver value to customers.
Application Programming Interfaces (APIs) are the enablers of today’s digital data and transaction services. These small software interfaces are everywhere online, powering billions of transactions, from getting the weather report to booking a cab to checking a bank account. They work by exposing contracts on how other applications can communicate with them and exchange data.
In financial services, an early role for APIs was to make open banking a reality. Regulators in many jurisdictions required banks to expose APIs, so third parties could access data on behalf of data owners to deliver new services and broaden customer choice. Financial institutions quickly recognised the potential for APIs to deliver the next generation of on demand, instant financial services, by dynamically connecting applications and partners across transaction chains. Today, financial APIs are booming, especially in retail and corporate transaction services, and a new wave of industry transformation is underway.
At Swift, we invested early in our capability to offer connectivity and services via APIs to our community, starting with real-time tracking of Swift GPI payments in 2017. Since then, we have continued to expand our platform and services and collaborate with our members and third parties, resulting in more than two billion API calls to our services last year. For example, financial institutions can use Swift APIs to give their corporate customers immediate access to key information such as account balances, the status of international payments or confirmation of counterparty details.
As adoption of APIs across financial services gathers momentum, financial institutions are considering how best to use them to deliver value for customers, where to invest for return and how to integrate APIs with their existing infrastructures. But what does it take to be successful? Here are four tips and strategies that you can use within your organisation.
1. Know the market
With any technology change, market acceptance is critical to success. In financial services, the maturity of API adoption varies across sectors and geographies and understanding this will ensure products and solutions are correctly positioned. So for example, today an API-based payment initiation service might gain acceptance more quickly than a product targeting the securities back office environment, simply because of the level of maturity of API use and real-time processing in those domains.
It is important to question what tangible improvement any proposed new product will bring to the user too. APIs offer unique value: on demand, granular data and the capability to customise. Will moving a service from messaging to APIs transform the user experience? If not, the investment may be better placed elsewhere.
2. Focus on standards
APIs are all about interoperability. Industry standard architectures (REST, aSync, gRPC, GraphQL) and data formats (JSON and XML) enable this at the technical level, but business standards and definitions are also essential. If there are differences in the way institutions describe and apply data elements (account data, for example), it will be harder and more expensive to consume services, because customisation is required for each provider. From the outset, the Swift community has worked to define data models for standardised APIs based on the international ISO 20022 standard, which, via our platform, provide a single channel to multiple providers.
Standardised processes and data will also provide huge efficiencies and opportunities when migrating to and scaling up an API-driven enterprise architecture, which is the future direction of travel for many financial institutions. Application functionality exposed through standardised APIs can be re-used within the organisation for solving internal challenges or for building new and innovative client offerings. This means that an organisation’s API investment can reap exponential benefits.
3. Be open, be proactive
Unlocking the value of APIs involves a cultural change that may be counter-intuitive for many financial institutions: They must accept that they are no longer in sole control of the end-user experience, but instead provide the building blocks that others use to tailor that experience. Embracing open standards, active partnering and co-creation are the skills needed to bring the best user experience to customers in any chosen sector. This will likely include seeking out non-traditional partners.
Swift standardised APIs are co-created with our community and trusted third parties. Recently, we have collaborated with banks, corporates and technology providers to develop a standardised API, supported by a community rulebook and real-time SLAs, that gives corporates visibility of their cash positions with all their banks from their own systems. We are working in the same way to co-create APIs for securities and trade finance applications.
We support community members working on their own APIs and partner with third parties outside the Swift community who provide API solutions that add value for our community. All Swift, community and trusted third-party APIs are accessible via our open, two-sided platform where participants can expose, consume, use and re-use APIs. The goal is to create new user experiences that reach and benefit as many customers as possible.
4. “Eat your own dog food”
Using your own APIs is as important as listening to users and partners. This will quickly show how well they work in the real world and whether the fundamental design is successful. Beyond this, it will become clear how adaptable the design is and where else it could be used both internally and externally. “Eating your own dog food” is a step on the road to defining a future API architecture for your institution.
Today’s customers expect enquiries and transactions to be handled instantly, and in a way that fits their world. APIs are the route to delivering this next generation of banking services. While every institution will make the journey at its own pace, depending on markets, customers and current infrastructure, now is the time to get involved and set a clear strategy for transformation.
5. Looking to get started?
Check out the Swift developer portal, an open environment where users can browse, test and develop APIs safely.
This article first appeared in Financial IT magazine’s Winter 2021-2022 edition.