Understanding APIs in Banking 2017

2016 saw a growing interest in Application Programming Interfaces (APIs) and especially open APIs. This, in part, was driven by the new competitive environment in the industry, which was triggered by the Payment Services Directive 2 (PSD2) in the EU, and the Open Banking Standard in the UK. During this time, firms were taking actions for regulatory compliance, but also to be able to protect their competitive positions in the market by adapting to the new environment in the most optimal way.

With this research survey, we wanted to better understand how banks worldwide were prioritizing API initiatives and why. We intended for the query to uncover the drivers behind the banking industry’s current API practices. The results of the survey illustrated that the API environment across global banks was undergoing a tremendous change. Even in 2016, some financial institutions were still viewing the adoption of APIs and open banking as a threat; others, foresaw banks transitioning to a more intermediary role, connecting customers and service providers.

Our analysis of the data shows that public awareness of new technologies drives an increase in firms’ initiatives for delivering innovative new apps, products, and services to customers. Thus, raising public awareness and customer demand for innovative products might be the most important factor that drives firms towards investing in innovation. Regulatory pressures have a moderate impact on banks in terms of launching new products. Overall, companies launch compliance-specific products – which address things like data security, for example – as a result of regulatory pressures. Even though these products are aimed to be more “compliance,” rather than “innovation,” the latter is achieved as a byproduct of such compliance efforts.

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