By Lauren O’Connor & Lachlan Aldred
What do you believe the future of banking will look like? No doubt many of you are picturing something akin to a science fiction film, and as we continue to see around the world, what was once seen as science fiction is quickly becoming science fact. The possibilities are limitless, it’s only our technology that needs to keep up!
You will have heard and seen use of the following acronym, A.P.I., in conversations and communications around various industries that are facing digital disruption, and the finance industry is no different. What does it stand for firstly, but what is it more importantly? It stands for Application Programming Interface, and it’s what many call a ‘foundational piece’ for any company’s digital enablement strategy.
Here is a clip that explains what an API is using board games and cards as an analogy.
Therefore, through using APIs, services and/or data can be exchanged between applications and programs that previously did not ‘talk’ to one another. Keeping this in mind, there are three main different types of APIs which can be used which we will discuss below.
These are APIs that are used within the traditional banking organisation, reducing friction and enhancing operational efficiency. A vast majority (88%) of banks viewed private APIs as essential in 2015.
Example: A new customer on-boarding solution could utilise private APIs. These APIs would allow prospects visiting a website to create their own deposit accounts. In most cases these new customers wouldn’t need to touch with a contact centre. The key difference is that customers can be on-boarded 24×7.
These are usually between a company and specific third-party partners, enabling the expansion of product lines, channels, etc.
Example: This could enable new financial products and services that include transferring real estate ownership. This is called e-Conveyancing. For example, e-Conveyancing is a new industry trend that will minimise manual processes when someone buys and sells a house. APIs will form the digital backbone between financial institutions to speed up and simplify property exchange.
In this scenario, business data is made available to third parties that many not have a formal relationship with a company. The term ‘Open Banking’ refers to the use of this type of API. Because of the structure of open APIs, many banks have a greater concern around security.
Example: In the future BOQ will release an increasing number of public APIs that will power new apps and services for customers. Public APIs will enable the creation of Apps that make it possible to show a high level view of every aspect of a person’s financial life. This may include superannuation, tax, investments, loans, savings, credit and expenses. Because people rarely have all their financial products with one bank the Apps will need to cross organisational boundaries easily. APIs will provide the Open Bank connectivity needed to power these future high level views of a customer’s financial situation.
While APIs are not new to banking and are nothing more than a structure for how software applications should interact, they provide the gateway for innovative, contextual solutions that would be difficult to offer without Open Banking. APIs will be the building blocks for new products and services in the digital economy, and will extend the reach of BOQ far beyond traditional banking and open our customers to a whole new world of possibilities.