3 key strategies how APIs support the digital transformation of a bank
1 Better Partnership Banking
APIs enable banks to open up their products and services to their partners. Making use of APIs banking products and services can be seamlessly integrated into the business processes of the partners and, as a result, customer experiences can be significantly improved.
For example, by implementing APIs, BBVA was able to integrate its products and services into partner businesses, resulting in a 20% revenue growth. These partners, especially new FinTechs, had better access to financial information, which allowed them to build better services. Recently, companies like nerdwallet, Spreedly, Cardlytics, Automated Financial Systems, Execupay and Mx technologies have partnered up with BBVA.
By opening up its APIs to third-party developers, Barclays was able to integrate its services with partner businesses and significantly improve customer experiences.
Banks like Barclays also benefit from the adoption of open banking through APIs. Beyond the standard free offerings required by compliance with European Union’s PSD2 regulation, banks can provide Premium APIs. This direct monetisation provides a lower risk and higher returns.
As of the end of 2022 Q4, there were 246 regulated third-party providers in the UK. They all make more than a billion API calls every month.
2 Higher competitiveness through innovation
APIs allow banks to open up their systems and data to third-party developers, enabling the development of new financial products and services. This helps banks continue to innovate and to stay ahead of the competition. Good examples are developer platforms of Capital One and HSBC.
Capital One has launched a developer platform that offers third-party developers APIs, allowing them to integrate Capital One services into their applications. This has resulted in the creation of new financial products and services. An example of these products is the Digital Auto Financing Credit Application, which allows customers to launch a credit application entirely online.
Also, HSBC launched a global developer portal. This portal provides access to APIs for third-party developers to integrate HSBC services into their applications, creating new financial products and services.
Reports in the Open Banking Implementation Entity (OBIE) showed that more than 6.5 million users actively use open banking-backer products in the UK. These products provide end users (individuals and small businesses) with innovative services to support money management.
3 Increased Efficiency
By automating processes and reducing manual intervention, APIs can help banks increase operational efficiency and reduce costs.
By implementing APIs, Wells Fargo was able to automate many of its manual processes and reduce operational costs. Processes such as fraud detection, payments, and data services are well integrated into the API gateways of the bank.
By using APIs to automate its processes, Bank of America was able to reduce its costs and improve the efficiency of its operations. For example, the bank was able to expand its cashPro payment API to give choices of over 350 payment types to customers.
By applying the three strategies APIs can play a crucial role in transforming a bank.
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