How APIs are supporting a revolution in the financial services sector

Published on the 09/02/2016 | Written by Jonathan Stern

Financial services

Throughout the world, financial services companies are facing a period of rapid and fundamental change, writes Jonathan Stern, and APIs are emerging as a competitive necessity…

For financial services companies, fresh challenges are appearing on all fronts. Existing customers are demanding the ability to interact with their chosen financial institution through channels, in locations and at times of their choosing. Increasingly this is coming to centre on mobile devices, which customers are adopting as their primary means of Internet connectivity. Indeed, many customers regard having to visit a physical branch as an option of last resort.

Customers are also demanding a different style of relationship with their financial services provider. They want to be recognised as an individual and have their relationship with one department recognised and understood by others; meanwhile, new competitors are turning up the heat and alternative currencies, such as Bitcoin, and crowd-sourced borrowing platforms, such as the Lending Club, are offering enticing alternatives.

At the same, time non-traditional competitors, such as Apple, Square, Google and even Facebook, are becoming rivals for established banks. Many are beginning to realise they risk becoming irrelevant to a large portion of their customer bases, unless they improve their interfaces and redesign their service offerings.

The need for change
Confronted with these growing challenges, financial services companies must make some significant changes and invest in technology that will allow them to become more flexible and able to meet evolving customer demands.

Just as the Internet allowed the move to online banking, now the prevalence of mobile devices is causing another shift. Institutions must work to ensure their front-end systems can be readily accessed and used by customers on tablets, smart phones and even smart watches.

At the same time back-end systems must be critically examined to ensure they are capable of providing the support required by the business. Banks must assess whether new capacity and capabilities can be added without causing disruption, while also determining the most cost-effective way of achieving this goal.

Financial institutions must also acknowledge that their various divisions can no longer work as silos, but instead they need to work together, sharing data to allow the creation of holistic customer views.

Institutions need to also consider how they are going to respond to the increasing number of new entrants in the market. Alternative approaches might include partnering with other operators, the acquisition of smaller competitors or assessing how new technologies (such as Bitcoin) can be put to work within the business.

The role of APIs
Meeting these challenges will require a fundamental transformation within many financial services companies. Methods that might have worked well for years must be examined and re-architected in light of the new business landscape.

Underpinning everything is the need for an efficient and constant flow of information. These flows must occur within existing back-end systems, between them and new systems, and with external resources and partners.

It’s important to acknowledge that the legacy IT systems sitting at the heart of banking operations are not going anywhere soon. Representing years of investment and supporting critical core functions, they need to be linked to new systems in innovative ways.

Such linkages rely on APIs. They allow disparate old and new systems to be woven together quickly and effectively, creating seamless information flows that can support and power future business opportunities. They also allow financial institutions to taken advantage of cloud-based platforms to underpin new activities. These could include the delivery of new customer interfaces or the creation of a test and development environment for future applications.

For example, APIs can allow a core banking system to share data with a new cloud-based front end designed to support mobile devices. APIs could also allow a bank to send and receive transactional data from a partner or share customer details with a newly acquired subsidiary. It’s all about the organisation becoming a ‘composable enterprise’.

To support this shift, IT departments within financial services companies must transform from their traditional function as a technology provider into an adaptive, responsive and nimble group. By doing this, they will be able to add significant value in what is a time of far reaching change.

To achieve this goal, the old approach to IT of developing, building and running systems must change. Rather, APIs should be used to link together existing and new resources to create the flexible and responsive infrastructure that financial services firms will need to flourish in the new business landscape.


Jonathan Stern is regional VP, ANZ at MuleSoft.

Questions or comments...

  1. Rob Rintoul

    Hi Jonathan,
    It’s been a while!
    I agree this is a where the logical extension from the existing financial institutions and the next wave of innovations needs to be stitched together. Do you have a view on the ownership of the data I connecting between third parties? Happy to chat directly 🙂


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