Melvin Kranzberg, one among the most sorted tech historians once said “Technology is neither good nor bad, nor it is neutral”. It seems to be relevant now more than ever in banking sector, which is embracing the revolutionary competition from inside. As we see, it is not the case of Banking vs something else, but a competition between traditional and modernized banking frameworks, which is tending towards a constructive overhaul.
The scope for API has maintained a constant surge across the technological space throughout last decade. But now it is all set to take hold of the banking revolution which is a part of Banking 2.0. Many factors have rendered this expansion, but the advent of Open APIs which can allow anyone to connect to services effortlessly has catered unprecedented impetus for it. APIs can now prove to be a perennial source of real-time data for banking apps and websites. They facilitate apps to draw information from multiple sources and interpret in their desired format. Invariably, what once we assumed as illogical and absurd has now become a competitive advantage.
How APIs can make a Difference?
APIs expose user transaction data in a primitive and consistent format and eliminate the discrepancies of stand-alone banking apps. By enforcing many governmental and regulatory constraints with rapid innovation in mind, many initiatives are taken to make the information exchange more reliable and secure. This has resulted in phasing out the possibility of disarray and inconsistencies and has increased the effectiveness of accounting operations.
An Open API regulation in place will ensure all banks to develop a common agile API which is available publicly and allows FinTech firms to develop centralized apps which can work for all other banks. This will result in more friendly ecosystems for Financial firms to share their customer specific data and offer many customized services under one authentic umbrella app.
Changes API will bring to Banking
- Bring down the fraud by centralizing the user transaction data.
- Reduces the infrastructure costs and other physical expenditure.
- Modernize the data analysis methods and raises the bar of financial transparency
- Boost the possibilities of advanced features and customized offers across multiple banks for an individual.
- Bring down the usage of proprietary banking apps and websites. Users can use banking apps of their choice with features they wish to have.
- Human interventions in bank branches will come down and they will be transformed to more of automated kiosks.
- Speeds up the transaction information update process which will drive quick loans sanctions, charity drive initiatives etc.
- Common eWallets will be developed for paying bills, mobile recharge and other financial apps.
What is the Challenge?
It is one thing to predict the upsurge of API in banking, quite another to ignore the challenges it is posing. Big banking systems, even though they are aware of this disrupting trend in the market are facing inherent limitations from their legacy IT systems to make the qualified decision about the transformation. It is not a challenge for them to innovate, but a series of replete adaptations they need to deal with when the trend continues makes their ambiguity vivid.
Many European banks, which had their infrastructure developed before the data revolution are apprehensive about losing their edge they had on newcomers. For ex: A London-based bank which had inherited good facilities in respect to geography and was offering many decent experiences cannot do the same when their location is not an advantage over a newcomer. Also, the limitation extends to fetching the phenomenal data they stored in their legacy systems in irretrievable form which is a core technical limitation of these Big banks.
However, they have understood that they can only prolong the development but not ignore them. They are relegating themselves to fit the tectonic shift in banking. This pragmatism has put the customer in middle and made service provider to adapt to what he is seeking.
When I was reading Chris Skinner’s blog, I was impressed by a great line he used “My mantra is leadership and how banks lack technological leadership. The pushback is that you have too many technologists without banking knowledge.” This tells something which many of FinTech organizations should focus at this moment.