Banks Banking on APIs for Payments and Beyond
Facing increased competition from financial services upstarts and tech firms, banks are doubling down on application programming interfaces (APIs) as a competitive tool, a new report shows. The Aite Group study canvassed product and digital channel managers at Asia-Pacific, European and North American banks, and found that those institutions view API development as a major priority over the next two years.
As for specific capabilities, 67 percent of respondents said developing APIs for real-time payments functions was a “high priority,” while 29 percent listed such APIs as a “moderate priority.” Just 5 percent said real-time payments were not a priority. Meanwhile, payments other than real-time drew slightly less interest, with APIs offering such payments cited as a high priority by 43 percent of respondents and a moderate priority for 24 percent. Twenty-nine percent characterized non-real-time payments as a “low priority” and 5 percent as not a priority.
But for banks to stand out in an increasingly competitive market, they should view APIs as a way to offer services beyond payments, said Enrico Camerinelli, senior analyst for Aite and the author of the report. Many institutions already are exploring non-payments APIs in at least some areas; 29 percent of survey respondents listed cash management as a high-priority API development area, while 67 percent said it was a moderate priority.
“Banks must move steadily beyond payment-centric APIs and explore corporate banking services,” Camerinelli noted. “Forward-looking banks should start opening APIs to collaborate with their corporate clients in B2B transactions that will span all global corporate banking processes.”
For banks, leveraging APIs to the fullest extent often might mean partnering with fintech providers that have expertise in that area, according to Aite. Customer expectations and demands are higher than ever, while banks often are strapped for time and funding and have to devote more resources to security issues. The resulting gap in services may be filled by partnering with fintech providers, Aite said.