A new model for digital banking: the Neo-APIBank

As the year 2016 comes to a close, we all turn our attention to the new trends and changes that 2017 has in store for us. Among these changes, there is one that has the potential to transform the online banking industry, not just technologically but conceptually.

We are talking about the Neo-APIBank model. In order to understand this model, we first need to talk about APIs and the role they play in the financial sector.

What is an API, and what does it have to do with the online banking industry?

Put simply, an API is application programming interface that allows software programs to communicate with each other by exchanging data, services, and resources. This data exchange, which takes place in a controlled, secure environment, forms the basis of the ecosystems that allow companies to collaborate.

In the banking industry in particular, APIs allow third parties to access bank data, as well as allowing them to carry out transactions and contract different products.

But APIs are nothing new: they have been used in the industry for a long time. The real advance is the opening up of these APIs.

By “opening up”, we mean that both clients and suppliers will be able to access multiple financial data sources in a scaled, controlled, and secure manner. This is bound to bring about unprecedented change in banking, an industry that until now has been reluctant to share data and technology and whose collaboration models with Fintech companies are still coming together.

Open APIs: a change of technology and a new way of thinking

As previously stated, the real importance of APIs is not the technology itself, but the change of mind-set that accompanies their more open use in the industry.

The market is pointing more and more in this direction, and the concept is being driven by new regulations, such as the European Payment Services Directive (PSD2).

Thus, the decision facing the banking industry is whether to embrace open, collaborative models or be pushed further and further out of the marketplace. The decision, to all appearances, will have to be a fast one, since consumers are the first to adapt and to proactively seek digital advances of this type. And if they don’t find them where they have always done their banking, they are quick to look for alternatives.

But keeping market share is not the only reason for adapting; it will also allow banks to become more streamlined while offering greater innovation and security.

The Neo-APIBank model

The model that appears to be the most viable at this time is the Neo-APIBank, which, according to the definition found in the Finnovating study, would become “an API Financial Platform”, very much like a financial Apple Store, where outside developers create new financial products and services using a bank’s API, with the added advantage that they benefit not only themselves, but others with whom they share.»

This is a model that, without a doubt, will require a high level of technological development, not only in terms of API integration but also control and security measures. But in our opinion, this is not the real challenge.

Whether this model or a different one is implemented in the end, what seems certain is that an open and collaborative approach will be required. Without a doubt, this will represent a challenge to many, more traditional financial institutions, that will not only have to adapt their corporate culture and strategic focus at the top management level, but also be able to propagate that transformation through every level of the organization.