Crafting a Durable API Strategy for Financial Institutions

Application Program Interfaces have been revolutionizing many aspects of banking. Making the most of this technology demands setting an overall strategy to ensure safety and broad adoption of the services enabled by APIs by consumers and businesses.

To satisfy consumer demands and to allow financial products and services to be accessed in new ways, banks and credit unions have been modernizing their technology offerings via application programming interfaces.

This technology has been around long enough that many institutions have an API strategy. However, after developing a baseline API approach, there are a few steps financial executives can take to optimize their API investment and better meet the needs of consumers and businesses.

Three key items are the cloud, security issues, and the customer journey.

Leveraging the Cloud with API Power

APIs and the cloud each independently benefit financial institutions. The former improves access to banking services, while the latter introduces a greater degree of flexibility. Together, APIs with the cloud make an even bigger positive impact on financial institutions.

Instead of spending years developing solution partnerships, institutions that combine their API and cloud strategies can rapidly introduce client-facing innovations, using internal or external resources. Better yet, any organization that wishes to integrate a bank’s services into its own systems can enjoy faster onboarding. Time and money previously spent figuring out how to take advantage of new services can be dedicated to more pressing issues.

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APIs Can Allay Consumer and Business Security Paranoia

A quick look at the news is all that’s needed to confirm the fact that cybersecurity breaches have grown all too common. But while every industry has to contend with cybercriminals, none is targeted more often than financial services. A quarter of all malware attacks were aimed at financial services organizations in 2018, according to IntSights.

During an era in which data breaches are occurring at an alarming rate, it’s crucial that banks and credit unions take the time to consider API-appropriate security measures as part of their strategy. Such efforts can go a long way toward landing new customers and keeping current ones. For many consumers, trust in data privacy and security is a significant factor when choosing a bank.

The great potential of APIs is to provide greater consumption flexibility — a bank’s services can be embedded in third-party applications and experiences. But in order for this potential to be realized, client-authentication and data protection practices need to evolve to consider the impact of third-party and multi-party service delivery.

Almost all institutions begin their API journeys by working first within their own walls, then with select accountholders, and next with a limited set of trusted partners. Truly open APIs don’t exist yet, for the simple reason that a standard approach for open, distributed customer authentication and multi-party data protection has not been created. Therefore, fintechs, service innovators and marketplace platforms that want to benefit from banking institutions’ APIs need to assume full responsibility for ensuring their propositions are secure, compliant and future flexible. Official designations — such as SOC2 (Service Organization for Control) for compliance and data access standards such as Durable Data API (DDA) — are more likely to be viewed positively by financial institutions than those with proprietary approaches.

Read More: 7 Myths of API Development and Deployment in Banking

Weaving the Customer Journey into API Adoption

Just because a service is made available through an API doesn’t mean people will start to use it. Some institutions operate under the assumption that an API is all that’s needed to drive interest in a new service and ultimately increase usage. A closer examination, however, reveals there’s more to making a service known than simply connecting it to an API.

Although there may be an initial uptick in awareness, achieving widespread adoption requires taking the customer journey into account as specific services are developed. Instead of hoping customers take note of a newly launched service, institutions can open the door for greater relevance, convenience and uptake.

One example of a service that business customers might be interested in is the option of completing payments and checking balances within their accounting application. All these customers have to do is download a companion application that makes the service accessible. This opportunity for increased simplicity may be enough to entice customers who would otherwise ignore a new service. By weaving in the customer journey and making services easier to use through APIs, institutions can set the stage for more significant interest from their customers.

In the past, businesses and consumers would often take the time to visit their local branch. Fast forward to today and one thing becomes abundantly clear — the days of frequent visits to branches are long gone. With the technology available to access almost any type of service within seconds, people aren’t often willing to wait. Catering to their need for speed is becoming increasingly important.

Institutions looking to bring greater convenience to the customer experience should start by optimizing their API strategy. While many competitors have outlined an API strategy of their own, few have taken the necessary steps to support trusted financial service delivery along the way. Institutions can stay one step ahead of the competition by combining API initiatives with their cloud strategy, “API-ifying” security and considering the customer journey.

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