wipro.com Open For Business: Are Financial Organizations Ready To Harness The Open API Revolution?
If we can make their experience better, give them information they didn't even know they needed, then we'll be leading the pack, says Chris Venter, General Manager of Consumer Digital Technology at ANZ. Picture this: you re in the middle of a business trip to Tokyo a city you ve never been to before and you run out of cash. If this had taken place just a few years ago, you would have panicked at the thought of being stranded. Today, such a scenario is but a minor inconvenience. You can simply reach for your mobile phone and launch an application that lets you locate the nearest ATM, find real-time exchange rate information, or monitor your bank account during the trip. You may not even need your bank card, as some payments can be made by waving your smartphone in front of a sensor or by transferring virtual currencies. How did this scenario become a reality so quickly? The answer is application programming interfaces (APIs), which are software gateways that let applications work together. APIs allow users to securely connect with just about any pre-defined service, application, or database. This technology is currently driving a wave of digital disruption in the finance sector. By allowing outside developers to access their propriety software, banks can benefit from innovative apps and new ideas. Consumers, in turn, enjoy greater transparency in their interactions with banks as well as sophisticated new features and services. If we can make their experience better, give them information they didn't even know they needed, then we'll be leading the pack, says Chris Venter, General Manager of Consumer Digital Technology at ANZ. Especially for companies and businesses, if we can help them aggregate their information into actionable insights, we'll make a real difference in their finances. We need to be able to show them how much they spend, how much they make, essentially showing what their cash flow should or could be compared to similarly sized organizations. 2
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Taking advantage of new opportunities Open banking has risen exceptionally fast in the past few years (see chart below). Banks have greater control over raw data and are able to move beyond traditional payment or account services, not only offering enhanced customer experiences, but also transforming day-to-day transactions into new digital revenue streams. 2013 518 508 474 Programmable web Growth of Top 10 Web API Categories Since 2009 369 348 338 333 315 312 298 2009 118 89 50 70 60 39 2 57 15 63 Social Financial Enterprise Mapping E-commerce Government Science Messaging Payments Telephony Because innovations borne from Open API experimentation tend to be driven by customer demand, they are pushing banks to become more flexible and dynamic in the way they respond to new challenges, says Philip Bowkley, Head of Non-Bank Financial Institutions (NBFI) at Barclays Corporate Banking. Open data and APIs disrupt established ways of working, says Philip Bowkley, Head of Non-Bank Financial Institutions (NBFI) at Barclays Corporate Banking. Because innovations borne from Open API experimentation tend to be driven by customer demand, they are pushing banks to become more flexible and dynamic in the way they respond to new challenges. For Max Tiong, Head of Startups and FinTech at DBS, harnessing APIs also involves adopting a new approach to collaboration, building an ecosystem of trusted, capable, and strategic partners that can plan and execute innovative Open Banking strategies in ways that traditional banking entities cannot. FinTech companies are the real drivers of banking and financial innovation, he says. They can take risks that banks cannot take 4
Today, they are varying the type of partners they work with, integrating technologies and services that go well beyond their traditional roles. They are essentially becoming a platform for people to add value as they see fit, says Neal Cross, Chief Innovation Officer at DBS Bank. Praveen Raina, Senior Vice President, Group Operations & Technology at Oversea-Chinese Banking Corporation (OCBC), banks reluctant to adopt this technology won t be able to avoid shifting their mindsets for much longer. True innovation is not just about technology, he says. It s about adopting the right processes at the right time. themselves, experimenting with technologies that the banks do not necessarily know how to use, and tweaking a product or service until it becomes profitable. This kind of collaboration not only expands the breadth and scope of the products and services banks can offer, it also ensures they will come out unscathed from the paradigm shift that is taking place. Banks have traditionally evolved in closed and protected environments, says Neal Cross, Chief Innovation Officer at DBS Bank. Today, they are varying the type of partners they work with, integrating technologies and services that go well beyond their traditional roles. They are essentially becoming a platform for people to add value as they see fit. For Praveen Raina, Senior Vice President, Group Operations & Technology at Oversea-Chinese Banking Corporation (OCBC), banks reluctant to adopt this technology won t be able to avoid shifting their mindsets for much longer. True innovation is not just about technology, he says. It s about adopting the right processes at the right time. In the next five years, all banks will have to make strategic choices about Open APIs to avoid being left behind. 5
Addressing roadblocks Some banks have already started integrating Open APIs into their processes and architecture, effectively adapting legacy processes and infrastructures. But to fully harness the power of Open APIs, they must be able to comply with new emerging Open Banking API standards and regulations, and ensure the security and quality of the data being shared and accessed. Transforming standards and regulations Started in Berlin as an open-source, open-standards, and open-data API developer portal, the Open Bank Project aims to open up transaction data by directly accessing each bank s core banking system. By taking away restrictive specificities, developers can use the same application across different banks. The United Kingdom is also making encouraging headway in this area. In September 2015, the industry-led Open Banking Working Group (OBWG) was tasked with developing a new framework that will help create an Open Banking standard, including a legislative framework that may be used to release APIs if the industry fails to implement the changes on its own. In its preliminary report, the OBWG outlined a set of recommendations to make Open APIs useful and viable, including a timeline that would see a fully functioning UK open data market become a reality by the end of March 2019. 6
Banks must quickly determine the way they will respond to the changes brought about by open banking; do they want to become a transaction platform for payments made through third-party vendors? Or do they want to make a foray into innovative services developed in partnership with FinTech partners?, says Philip Bowkley, Head of Non-Bank Financial Institutions (NBFI) at Barclays Corporate Banking. Max Tiong of DBS points out that the full support of key government organizations is clearly felt in China, Singapore, and Australia. The European Union's (EU) Payment Services Directive II (PSD2), meanwhile, was launched in October 2015 to make cross-border payments within the EU as easy, efficient, and secure as national payments within a member state. When implemented in December 2017, PSD2 will force banks to push the boundaries of open banking and strengthen their digital offerings. As these developments indicate, Securing data and ensuring long-term compliance The Asia-Pacific region leads the way when it comes to creating an environment in which banks, start-ups, regulators, providers, and competitors can work together relatively fluidly to ensure Open APIs are developed as securely as possible. Our strategy is to make sure our APIs are ready; for instance, we've developed a portal for developers to find standard definitions of APIs, how to use the APIs, licenses and uses, and so forth, says ANZ s Chris Venter. We've essentially developed internal protocols that will be able to be used externally once the moment comes. Max Tiong of DBS points out that the full support of key government organizations is clearly felt in China, Singapore, and Australia. In these markets, clear business, data, security, and technology agendas are set, allowing banks to it s not a case of if, but when banks will need to define their open banking strategy. Philip Bowkley puts it this way: Banks must quickly determine the way they will respond to the changes brought about by Open Banking; do they want to become a transaction platform for payments made through third-party vendors? Or do they want to make a foray into innovative services developed in partnership with FinTech partners? create flexible and reactive regulatory frameworks that put security at the heart of all processes. As a result, banks can focus on creating customer and business-driven products that ensure data can t be compromised before being entrusted to a third party, as opposed to developing purely technology-driven services that ignore potential vulnerabilities to seek immediate returns on investment. For banks to take Open APIs to the next level, the region s banking sectors needs to work together to reinforce their key security enablers, says Philip Bowkley. Whether it is user security, Know Your Customer protocols, or basic identification standards, a strong impulse is needed to continue protecting customers, their assets, and their interests. 7
Moving to open banking is like "breaking a few windows to let free air and light in," Andres Wolberg-Stok, global head of emerging platforms and services at Citigroup, has been quoted as saying. "It ends up benefiting FinTech as a space." Finding an appropriate platform Despite having identical technologies, objectives, and processes, some organizations are closer than others in making this scenario a reality. Citigroup, BBVA Compass, Bank of America, and Capital One are among the large U.S. banks that have been making parts of their internally developed software code available to external developers. In March 2016, Capital One became the first U.S. bank to launch a full-featured developer portal. Called Capital One DevExchange, the portal engages developers through such features as self-serve registration, instant API access, documentation, and testing environments. The ideal API platform is a co-innovation platform that works completely outside the traditional enterprise in a way that is at once open and extensible, fast and agile, and scalable to fit almost any purpose. A new California company just may fit that bill. Paymency, based in San Diego and founded by banking veteran Gary Lewis Evans, expects to offer an API-based platform for finance and banking similar to Amazon s platform for retail. Much like a digital store, Paymency s platform would offer a range of products and services from various FinTech companies and other partners, including non-bank entities. Finding a trusted, reliable, and appropriate API platform can be an invaluable advantage for a banking organization looking to harness the power of Open APIs. Moving to Open Banking is like "breaking a few windows to let free air and light in," Andres Wolberg-Stok, global head of emerging platforms and services at Citigroup, has been quoted as saying. "It ends up benefiting FinTech as a space." 8
Conclusion The way customers interact with banks is changing fast. Thanks to Open APIs and the myriad consumer-centric applications, programs, and services they enable, people will soon be able to launch transactions, complete payments, and manage their wealth without feeling or knowing they are actually interacting with a bank or financial institution. By harnessing this technology, banks will be able to play a wider range of roles across the financial value chain, varying their product offerings and transforming the way products are delivered thus, responding to customer demand and locking in their loyalty. Is your organization on board to reap the benefits? 9
Driving innovation with open APIs It s all too easy to view open APIs as a threat, but in reality they present huge opportunities for banks, says Presanna V. Sundararajan, Wipro s Practice Head of Blockchain and API Platform. It s all too easy to view Open APIs as a threat, but in reality they present huge opportunities for banks, says Presanna V. Sundararajan, Wipro s Practice Head of Blockchain and API Platform. It's an opportunity to spend less, do more and explore new ways and ideas to use valuable data gained over years that s there at the bank s disposal. Many banks are already adopting Open APIs, he adds, seizing the opportunity to drive an outside-in innovation culture, customize their offerings, and move away from a one-size-fits all approach. Sundararajan also cites a significant push coming from regulators to reduce the entry barriers and drive more competition in the financial industry. Still, he cautions that there are major challenges to the development of Open APIs. One is to make sure that legacy infrastructure does not come in the way of scalable, robust APIs. APIs built with shortest path to host is an approach some of the banks have started adopting to overcome this challenge, Sundararajan says. Other big challenges, in his view, are to ensure secure access, leverage emerging security standards, prevent hacks and attacks, and comply with privacy and other regulations. It s also important to actively engage the developer community, soliciting feedback and building APIs that really make a difference, he says, and this can be addressed with a strategy focused on community building. Ultimately, however, Open Banking initiatives are not just about technology, Sundararajan points out: they are about building a customer value ecosystem centered on the bank. The challenge, therefore, is to create an Open Banking infrastructure that accelerates the bank s journey in building an API-enabled ecosystem of internal, partner and third-party value networks. 10
About Wipro Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) is a leading information technology, consulting and business process services company that delivers solutions to enable its clients do business better. Wipro delivers winning business outcomes through its deep industry experience and a 360 degree view of Business through Technology. By combining digital strategy, customer centric design, advanced analytics and product engineering approach, Wipro helps its clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, strong commitment to sustainability and good corporate citizenship, Wipro has a dedicated workforce of over 170,000, serving clients across 6 continents. For more information, please visit www.wipro.com 11
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