Financial customers are relying on digital solutions more than ever before. According to research by Plaid, the percentage of people using technology to help manage their finances has skyrocketed to 86% in the UK and 88 percent in the US. This scenario puts increased pressure on financial services organizations to ensure their customer experiences are top notch.
Established companies with legacy tech stacks may feel they’re at a disadvantage, but for banks willing to explore the opportunities offered by API-first solutions, they may find they’re actually in an advantageous position.
Making APIs the Heart of Digital Products
Application Programming Interfaces (APIs) have proven their worth for years as efficient tools allowing two systems or applications to talk to each other and trade data. Within the financial sector, they’re generally used by companies to either streamline processes (as internal APIs), or to share data securely with external partners (as open APIs).
However, when building a digital product, it’s not unusual for design teams to become so preoccupied by the excitement of features around the user experience that APIs get relegated to afterthoughts. API-first solutions flip that approach and shift the focus onto the API requirements, so the platform or app is defined around those specifications. Instead of the API being the icing on the cake, the API becomes the cake.
It’s not a decoupling from the user experience, it’s more a reframing. If you know customers will need a means of viewing their account balance or making transfers, those capabilities could have the intention of being APIs from the outset. By viewing the back end in this way, it expands the potential for use cases beyond just the originally intended product.
The Benefit of Being Established
Market advantage tends to go to whoever gets there first, but there can be advantages to arriving second, particularly for established financial services brands. First movers make the first mistakes, which offers learning opportunities for anyone behind them who’s paying attention. Banks are the ones with the wealth of permissioned data and by being API-first, their digital solutions can enhance the customer experience with a trove of capabilities and options. Plus, with development costs getting cheaper by the day, it’s become much easier to realize a swift speed to market for thoughtful and purposeful services, such as money management tools, digital payments and personalized recommendations. By centering a solution around APIs, second movers can keep pace with digitally-minded disruptors for a fraction of the cost of modernizing their entire tech stack.
Putting Advantage into Action
API-first solutions involve imagining a new service and then building a system around it. Banks would be future-proof, able to swap out the front-end, while the back end remains in place. If they opt for a third-party UX platform, they would also avoid the burden of that maintenance.
Customers’ needs are higher than ever as they expect their financial institutions to guide them through the current economic storm. Internal APIs allow established firms to enhance their customer experience by optimizing their data more effectively. From assessing risks to expediting services, there are a multitude of ways banks can pair data and API technologies to empower their customers.
There are also monetization opportunities to explore via open APIs, similar to how grocery stores provide additional visibility to CPG vendors’ sales figures. API-first solutions allow banks to expose their wealth of data to multiple partners, although this endeavor should be approached with a healthy dose of ethical consideration.
Just Because You Can, Doesn’t Mean You Should
As much as their vast stores of customer data carries benefits for established financial services companies, it also carries an equal amount of responsibility. In their US Banking Digital Trust Benchmark 2022, Insider Intelligence found that customers’ trust is shifting away from their primary financial institution, and for the first time, PayPal outranked traditional banks. People are becoming savvy about their privacy and data rights, and uncomfortable with the sense that companies may know them better than they know themselves. As artificial intelligence and machine learning become more entrenched in digital solutions, the insights that can be gleaned become both stunning and worrying. Financial services companies looking to overcome their legacy constraints with API-first solutions should ask themselves the tough questions about how their data could be misused before making it available.
Sending an alert that someone has surpassed their allocated movie budget for the month is one thing. Sending a message that they have an abundance of liquor charges and might be dealing with an addiction, is something else. The first is a great example of using data to improve people’s lives, whereas the other could be viewed as overstepping the line. Figuring out exactly where that line sits is a vital component to designing data products, especially if they’ll be made available to third parties.
API-first solutions are really about delivering better products faster and with more versatility. Digital products anchored in this approach can deliver the capabilities customers truly need, without compromising their trust, while delivering value for many years to come. It’s a way of creating some back-end stability in this ever-fluctuating, front-end focused world.
The author, Gavin Estey is VP Technology, Americas at Appnovation Technologies.