Published July 21, 2021
This is the third of a three-part series about how APIs are becoming increasingly instrumental for financial institutions—which is why so many more are investing in them.
Read the first post “How banks can get the most from API content” and the second “Orchestrated APIs help FIs speed up their digital transformation.”
The last blog post, Orchestrated APIs looked at how APIs, when they’re working together, deliver substantial benefits for FIs. That includes the standardization orchestration brings by addressing the disparity of APIs in various operations and applications. And this blog hones in on how API toolkits can help deliver the building blocks that you need to help bridge the gaps—and catch your competition who has already gone all in on digital transformation.
Many of the digital-first changes FIs need to make rely heavily on APIs. Which is why, as reported by Forbes, API investments are the 2nd hottest technology trend in 2021. And while the investments are wise for FIs, you need to do more than just acquire them.
Uniform. Consistent. Orchestrated. That’s what stand-alone APIs are not. And API toolkits are built with an understanding that each FIs’ applications are different—there’s not a software product available that is built to suit each one’s needs. But, using API toolkits, you have the ability to customize and build your own API offering that’s the right solution for you and your customers.
While there are many benefits to using API toolkits, overall it’s the level of innovation they deliver that helps FIs the most. The pandemic has seen many FIs see the evolution of consumer demands outpacing their ability to adapt.
FIs began embarking on their transformation journey over a decade ago and have made great strides in digital, contactless, NFC etc. And then the pandemic hit which accelerated things significantly – with some stating a decade of innovation happened in 10 months.
Now digital wallets are becoming commonplace and consumers’ choices to pay are increasing rapidly ushering in an era where fast, convenient and reliable just don’t look the same as they did two years ago. So now FIs need to innovate faster to adapt to the future. And by 2030 with two billion people having access to digital banking across digital platforms, banking could look vastly different. Open banking, cloud-based data sharing and blockchain technology that increases security and speed are just some of what will fuel that change.
“When I look at disruptors in the financial services space, they exploit speed. That is the cheat code to survive,” Julienne McLean, a former consultant and now agility lead for consumer and community banking technology at JPMorgan Chase said during the 2020 virtual Devops World.
And API toolkits enable FIs to innovate faster to futureproof their business, meeting consumer demands securely. When quick pivots are needed, as they have been during the pandemic, an API-first approach means you can easily adapt—while those who can’t will be left behind.
Related: Why banks must increase tech spend and invest in digital first
The ability to explore APIs, extend them, build and create your own all while managing them in one place gives you a big innovation advantage. That’s what orchestration does for your APIs in addition to getting all of your software code in one container so it’s uniform and consistent. That way, every one of your services across all channels is seamless and secure.
Here’s a stunning fact: On average, engineers at Amazon are deploying code every 11.7 seconds. But that wasn’t always the case—in fact Amazon used to have a big scaling problem resulting in wasting nearly 40 percent of their server capacity. But that was back in the early 2000s. To fix the problem they found an API-led continuous deployment pipeline that resulted in the creation of the Amazon Web Services (AWS) cloud that eventually led to the astonishing amount of code they constantly produce today.
That’s the power of CI/CD continuous integration and continuous delivery which API toolkits can use to help you extend your APIs. And when you’re already innovating and deploying you can easily add on future technology that you can quickly deliver across your entire operations. And CI/CD gives your developers the ability to scale up and down quickly and as often as needed without impacting each other’s work. Also, it has the added benefit of being able to easily fix bugs and tackle problems as they arise, handling disruption even on a COVID-19 level.
And the Amazon example should raise a red flag to FIs - as the largest eCommerce company in the world moves closer to increasing their financial services (during the pandemic they partnered with Goldman Sachs to offer small businesses lines of credit). If they disrupt banking like they did brick-and-mortars then those FIs using an API-led CI/CD pipeline will be best poised to survive.
Initially the rise of Fintechs was seen as a threat to traditional banking, but more and more FIs are beginning to understand that partnering with them is good for business. According to a report published by Ernst & Young, “The biggest near-term threat to most banks comes not from FinTechs but from traditional competitors better leveraging those FinTechs. Our analysis of 45 major global banks reveals that while all banks are engaged with FinTechs one way or another, only around a quarter are extensively engaged due to barriers to collaboration with FinTechs.”
API toolkits help FIs move beyond those barriers to develop APIs that allow them to partner with Fintechs how they want to—extending their services while poised to embrace future innovation easily, quickly and cheaply. They also help FIs that usually struggle to detect early warning signs of fraud with the ability to use Intelligence Driven Authentication (IDA) verifying that a customer is who they say they are.
Competition in the FI space and the need to meet rapidly changing digital-first customer demands has never been higher. So, it’s clear that the digital transformation that began before the pandemic but has since gone into overdrive is crucial for FIs. And while some are steadily pushing digitally forward, other FIs are struggling to meet the challenge of the times—but APIs, API orchestration and API toolkits may be just what they need.