Your API: the key that turns a bank into an open innovation platform
Some technology companies have used their dominance in the Internet to enter the financial market. To compete with them, banks seek new avenues of innovation, such as opening bank APIs.
Between September and December 2013, while the Innova Challenge Big Data 'datathon' was being held, BBVA opened real data on banking transactions to third parties for the first time in Spain. Through an open API (details here) that received 6.7 remote calls over two months provided a community of 780 programmers with anonymized and aggregated data on card transactions in customer segments in Madrid and Barcelona. Their challenge was to contribute to the opening of banking services by creating applications to improve customer benefits. 144 applications were submitted by developers from 19 countries.
We note this milestone because it reflects an innovative and relevant stake: to initiate the transition from a bank to an innovation platform open to third parties. Let's see why it's important.
The idea is that the banking service provider activates an ecosystem of third-party applications and services opening its APIs and housing its own marketplace of applications, both native and foreign (BBVA on the trail of its own applications ecosystem) in order to expand the range of services to the customer.
In a sector with fierce competition, strengthening the relationship with a customer that demands more services in accordance with the digital age, either by channel (mobile) or design experience (real-time information, visual representation of the transactions, voice recognition to report balances to people with sight problems) provides a significant competitive advantage. Why? Because the customer demands it. Everyone has different interests and needs, and the API allows the bank to redirect with some flexibility customer data to the devices and applications that this person prefers to use, whether provided by the bank itself or a small startup. So simple, so revolutionary.
The first proposals, such as that from the Californian technology company Yodlee (founded in 1999 and in 2013 already had 45 million users and was serving about 150 banking firms), disintermediated banks in handling data on their customers. Initiatives subsequently emerged such as Open Bank Project, from the German firm TESOBE, which allows the bank to continue to lead, with the entailed security and guarantee, the process of user authentication when using their apps on personal finances, cost control, billing reminders, equity position and more (well explained in this video). Its slogan is ‘Bank as a platform. Transparency as an asset’ and aims to accelerate the transition from being a bank to being a platform of own and third-party services. In its hackatones apps have been suggested to make donations easily with the cents left over from transactions, services that allow user authentication through facial recognition by taking a selfie or a personal finance system designed for children that allows parents to conduct full expense tracking.
The third stage includes cases where the actual bank opts to create its own native ecosystem and a Developer Center to then encourage programmers and developers to use their APIs. The French Credit Agricole did it in January 2012 with CAStore, its own showcase of applications and services created by third parties (more on this video). Previously, the company took two years to create its first native application. When it launched its catalog, it had 19 apps from five developers (four external) and 24 more ideas.
Banks that are committed to innovation face the dual challenge of adapting their services to the digital environment without losing security, and facing up to the fact that their competitors are no longer just other banks but technology companies focused on creating innovation platforms capable of technical disintermediation. Therefore, the most innovative banks are already exploring how to integrate this trend and open their APIs; so we will soon see new developments. Lowering barriers to entry for developers, holding programming contests and events and signing agreements with technology partners can be some intermediate steps to further strengthen this process.
If you are interested in the world of APIs, find out more about BBVA's APIs here.