For decades, getting disparate bank applications to talk to each other was a nightmare. Most integration involved custom, point-to-point code, manually written by a programmer. Getting systems to communicate with one another included manually translating data fields between the two applications, and defining business rules for the use of the information. In 2000, APIs emerged for externally facing integration, driven by pioneers Salesforce.com and eBay.
REST APIs are the latest evolution in integration technologies, enabling fast performance, reliability, and reuse of components that can be managed and updated without affecting the system as a whole. APIs are now critical building blocks for the bank of the future and driving business value with four key use cases:
Although there is much blurring of lines between the use cases, there are different target audiences for each of the four API approaches.
- APIs for Integration -- Enterprise architects and developers
- APIs for Banking as a Platform -- Digital neobanks
- APIS for Innovation -- Fintechs
- APIs for Connectivity -- Bank customers
Web services, microservices, and APIs enable legacy modernization by wrapping legacy systems with a decoupled integration layer, bridging traditional batch-based processes to real-time, digital cloud, mobile, and social applications. APIs enable the modular application stack underlying Banking as a Platform and provide neobanks with state-of-the-art digital banking capabilities. As open banking grows, driven by regulatory imperatives, shifting customer demands, and the threat of fintech firms, APIs connect banks and third-party firms entering into collaborative partnerships for innovation. To access banking services, most customers manually log in to a web-based or mobile platform, pulling balance and transaction data on demand. APIs are emerging as a new connectivity channel, streamlining and securing on-demand, programmatic access to financial data for accounting packages, treasury management systems, and ERP platforms.
For banks just starting their API journey, Celent recommends a series of guideposts:
1. Establish API Innovation Team
2. Prototype Internal APIs
3. Create API Developer Portal
4. Publish API Developer Portal
5. Expand Open APIs
6. And finally, find technology partners along the way who can help you to jumpstart your API journey.
For more on this topic, check out my Celent report, titled “APIs in Banking: Four Approaches to Unlocking Business Value.”