Gone are the days when – for customers - banking meant stepping into a physical branch, interacting with customer service representatives in person. For today’s customers, visiting the bank means tapping the banking app, opening the customer portal and logging in to the digital assistant. In this age, when physical banks are paving the way for digital banks – channels, payments, wallets – fintech start-ups and large tech companies (Amazon, Google, Apple, Alipay) are redefining customer experience and beginning to claim a share of the financial services market.
Average assets held by one of the top ten banks of the world is worth $2.5 trillion, which is more than the GDP of France [1]. However, the overall investment in Fintech companies has reached $30.8 B, up from $1.8 B in 2011. Some of the banks have invested in financial technology themselves [2] but are facing competition from large tech companies like Apple, Amazon, Google and Alibaba apart from others [3]. Regulatory changes are mandating banks to securely share information with a view to improve customer service [4].
The question arises, how can traditional banks keep pace with this competition? The answer is APIs – employing APIs to manifest existing services, processes, assets and participating in a networked financial ecosystem while still making use of their strong customer base.
Three things enabled by APIs can make a traditional bank continue to be a financial powerhouse in this new age economy:
Enhance customer experience
In this new age, there is a need to enhance the current “small” and “bank-only” centred journey of a customer. For example, when it comes to auto-finance, a customer journey should not end with just “car finance”, but also extend to helping him “find” the “right” car at a “reasonable price” with “warranty”. In some cases, each of these elements comes from a different service provider.
This requires the bank to build a larger ecosystem to connect with the sellers and other service providers. This is possible only through an open architecture with APIs that expose offerings of the participants. For the bank, this even means exploring information related to its own financial offerings that can create value for the customers in their journey.
E.g. Commonwealth bank of Australia has created an augmented-reality app for users. The app allows users to place the camera at a property and see its current price and sales history. The app also provides a mortgage calculator and other financial tools and can help to connect with realtors nearby. Through APIs, the bank has thus created a continuous journey for the customer to look-up the price, calculate the mortgage, connect with the realtor and apply for a loan. (5), (6)
Extend offerings of products and services
In the quest to provide high-value scenarios for customers, banks eventually look for options to extend the core banking offering by discovering additional services and products along the journey. For example – analysis of cash flow, management of accounts receivable are areas to build new services on, beyond the core services offered by the bank today. This – over a period of time - helps the bank emerge as an aggregator of products and services. Experience and information APIs don’t just make the aggregation possible, they also make the aggregation of products and services, dynamic, real-time and personalized.
E.g. Under Open Banking directives, banks are publishing APIs for 3rd-party developers and partners to develop additional services on regulated access to existing products and services (Bank of America developer portal, Citibank developer sandbox, BBVA API marketplace, Capital One dev Exchange) (7), (8). Some banks and financial service providers are aggregating APIs from multiple financial service providers into a single API (Figo).
APIs make the bank create a value network across industries and a large portfolio of offerings. It helps the bank protect their business against disintermediation from the tech giants and the Fintech start-ups.
Reposition own assets
Banks are generating tons of data. For example - HSBC has 39 million (9), Barclays – 24 million (10) and Capital One – 45 million (11) customer accounts. Banks possess not just demography data, and spending pattern of the customers, but also data related to the journey of customers in digital channels. APIs can unlock the real value of this asset by helping to create a network effect around this asset faster.
For example - experience APIs externalize information about banking products and services in the context of the customer journey. More interesting is the fact that as experience APIs are accessed, they can help track the journey of the customer further. This rich customer footprint helps to create further “valuable” set of APIs. The APIs not only help in recommending and selling the bank’s products and services but also help in selling products and services of ecosystem participants – thereby creating a new revenue stream by monetization of APIs.
The solutions and ecosystems of banks enable customer experience at a faster pace (weekly sprints and continuous deployments) than the back-end legacy systems and solutions. Back-end solutions of a bank (banks still run mainframe for many business functions) changes much slower - through quarterly or monthly releases. APIs sit in the middle of fast-moving customer-facing solutions and back-end legacy systems to synchronize the two modes of IT so that the old legacy asset is not a constraint for the young digital face of the new-age bank.
Conclusion
APIs need to be a part of the business strategy of new-age banks. Even though API adoption is higher for payment-centric customer interactions, a bank’s API strategy needs to be holistic and consider the entire value chain of the customer. A holistic look at the value chain and a well-thought-out API Strategy will reposition a bank’s assets towards new and potential offering, broaden the offering with new products & services, and finally deepen the experience with customers. In this age of networked financial ecosystems, API has the potential to multiply the return on investments for new products and services and make the traditional bank an agile, new-age, digital player.
What we do
Our architects at Wipro look at the enterprise landscape of customers, the aspiration of the enterprise, state of digital integration and devise an API strategy.
Our API strategy helps organizations build an API-led foundation of the enterprise to support current business, experiment with innovative offerings, enhance customer experience, scale business with new channels and monetize new business opportunities using the power of value network and interoperability of systems and solutions.
Our architects and practitioners help to:
References:
1 - https://www.investopedia.com/articles/investing/122315/worlds-top-10-banks-jpm-wfc.asp
2 - https://www.businessinsider.com/fintech-ecosystem-report, https://www.mckinsey.com/industries/financial-services/our-insights/synergy-and-disruption-ten-trends-shaping-fintech
3 - https://www.forbes.com/sites/tomgroenfeldt/2014/09/17/banking-vs-google-apple-and-amazon/
4 - https://www.openbankproject.com/psd2/
5 - https://www.youtube.com/watch?v=o9T9crNMB_w
6 - https://thefinancialbrand.com/17766/commonwealth-bank-augmented-reality-iphone-ad/
7 - https://sandbox.developerhub.citi.com/api-catalog-list?field_api_market_tid=50
8 - https://developer.bankofamerica.com/CPODevPortal/apidocs/public/APIDevPortal.html#/home
9 - https://www.about.hsbc.co.uk/
10 - https://home.barclays/investor-relations/reports-and-events/annual-reports/2017/
Industry :
Ankur Pahariya
Assistant Manager, Strategic Marketing, MAS
Ankur looks after marketing for Cloud Application Services ensuring that Wipro’s Cloud proposition reaches the target audiences effectively. He comes with a unique blend of working in mainstream retail with a globally renowned retail group, retail in start-up domain and the non-profit sector. A keen analyst, marketer, strategist and implementer, Ankur has strong interest in evolving concepts like Analytics, Big Data, Digital Marketing and Web Analytics.
