Wednesday, 24 July 2024

Open Banking and API adoption accelerates

5 min read

By Aman Kler

Digital disruption is rapidly changing the competitive and operating landscape and driving institutions and regulators to adopt opening banking strategies and create API enabled IT architectures.

  • Banks are increasingly looking to bolster their strategies on open banking and Application Programming Interfaces (APIs) due to a rapidly changing competitive and operating landscape.
  • The new internet-based companies are creating value and supply chain ecosystems that rely on APIs to connect with services providers, distributors and suppliers
  • Banks are now shifting their products and services to be more customer-centred

An increasing number of banks are actively adopting open banking strategies and making their Application Programming Interfaces (APIs) available to third parties service and solution providers.

From the early days of web-API applications introduced by cloud- and software as a service- (SaaS) enabled internet players such as Salesforce, eBay and Amazon, they have been embraced and popularised by next generation digital commerce and social media platform players such as Facebook, Twitter, Uber, Airbnb, etc. In essence, APIs allows softwares to communicate with each other. In practical application, it enables speed and agility in how a company works with a third-party service partner to create value for its customers.

In financial services, the advent of e-commerce based fintech competitors such as Ant Financial,JD Finance, Tencent, as well as challenger banks, particularly digital-only banks such as WeBank and MyBank, have brought APIs into the wider consciousness of the industry.

They offer innovative financial solutions, such as alternative credit-rating, simpler lending processes and customised services. Part of their success may be attributed to their adoption of best-in-class API architecture.
In an increasingly networked and platform-driven environment, these new web-based companies are creating value and supply chain ecosystems that rely on APIs to connect customers with relevant product and services providers, as well as distributors and suppliers.

There has also been increased regulatory impetus, as regulators in the Asia Pacific region are proactively adopting global best practices in open banking and APIs and implementing policies, guidelines, and often industry wide initiatives to encourage their use.

Furthermore, there have been shifts in the preferences of consumers, highlighting the need for banks to offer seamless and frictionless omni-channel financial services.

Banks are also starting to view their products and services from the perspective of the customer. And are looking to embed them into their daily lives and habits through customer-centred ecosystems.

This process is helped along through API-based solutions that increase the agility of operations, particularly through collaboration with fintech firms, to promote customer-centricity and an enhanced user experience.

As such, there are numerous benefits to the use of APIs. It enables banks to have a faster speed to market, as months or years of developing a product has been reduced to mere weeks, thus allowing banks to capitalise on market opportunities.

It also allows banks to reach to a wider consumer base, and facilitates the development of more innovative products, particularly through collaboration with other players in the market, to foster the growth of an ecosystem.

APIs and Open Banking today

With the increased need of an API strategy, there have been numerous developments globally, particularly in the European Union (EU) and the UK. In the EU, the Payment Services Directive 2 (PSD2) requires banks, through an API framework, to allow third party providers with access to their data.

In the UK, Louise Beaumont, co-chair of the techUK Open Bank Working Group and member of the Open Banking Implementation Entity (OBIE) highlighted the need for banks to question: “What is the role of their bank, or banking in general, in an open future?”

She described the role of the Competition and Markets Authority (CMA) in forming the OBIE. The OBIE aims to implement the Open Banking Standard, a set of guidelines for banks to share their data in a secure and standardised format, through the use of APIs, after testing the framework with nine banks.

In the Asia Pacific region, developments have been uneven, but some counties are forging ahead with open banking and APIs, with Hong Kong and Australia developing frameworks (Figure 1). The Monetary Authority of Singapore (MAS) released the “API Playbook” a guide to facilitate the adoption of APIs by banks, with the MAS itself leading the charge by releasing APIs dealing with data and regulations.


Case Studies


DBS Bank claimed to have the largest banking API platform in the world, boasting more than 155 APIs for a range of services. With its customer-centric approach to digitalisation, Lui Su Kian, Chief Operating Officer of the DBS Consumer Banking Group stated: “It doesn’t change as we transform from a traditional to a digital bank. It’s just that new tools are made available for the customers and ourselves to make the entire journey joyful and easy for both the customers and ourselves,”

As such, the bank adopts an omni-channel approach to seamlessly embed its services into the customer journey as Lui stated: “We made ourselves invisible”. To do so, the bank leverages APIs as an integral building block to form its platforms, with the aim of building an ecosystem.

For example, as part of its ecosystem-building strategy, the bank introduced “Smart Buddy” one of the world’s first school-based wearable tech savings and payments platform and mobile application. And to expand the features beyond payments, the bank utilised APIs, even incorporating one with the Health Promotion Board, to share health-related data. It allowed the board to provide reports to schools about the meal and exercise patterns of its students. The program’s functionality proved itself to the 40 participating schools,and the bank intends to expand to another 40 schools, and all of Singapore’s primary schools.

Fidor Bank

Fidor Bank utilises APIs as an integral part of its banking platform, to allow for collaboration with third-party developers. Thus the bank leverages APIs with the aim of integrating with fintech startups to form an ecosystem. It also provides a sandbox for the creation of add-on services in a marketplace format, to allowconsumers to personalise their banking experience.

This is seen in the FidorFinanceBay, a digital marketplace where “the consumer can find a series of different solutions, different offers as we bank, as we may say a holistic product experience there in order to cover all needs he or she as a consumer is facing” as stated by Matthias Kröner, founder and CEO of Fidor Bank.

For example, the bank offers APIs to facilitate the real-time clearing of Euro-currencies when cryptocurrency trading, by allowing the bank’s partner, ‘’ to show the bank’s customers on its portal for trading. This ensures efficiency while trading, thus adding value to customers. The bank uses APIs in its ecosystem to enrich the customer experience.

Macquarie Bank

Macquarie Bank unveiled its open banking platform, with the personal financial management app Pocketbook, a subsidiary of ZIP, being its first collaborator. The platform facilitates the provision of new services by connecting third parties to customer data through APIs, making it the first bank in Australia to do so. The platform is lauded for paving the way towards greater control for the customer in the sharing of data.

Macquarie's head of personal banking, Ben Perham offered: “Our customers have been telling us they want to securely connect their information into their favourite accounting software, budgeting app and other innovative services they’re interested in. Macquarie’s open platform will make this possible. We’ve built a highly personalised digital banking experience, so empowering our customers to securely manage how they want to use their own data is the logical next step."

Thus, the bank’s customers are able to use their banking data, such as their transaction balances, to connect with third-party providers such as Pocketbook, to personalise their banking experience. The bank is a forerunner in the Australian government’s efforts in promoting open banking. By including customer transactional data, the bank beat NAB’s API portal that offers a limited number of APIs that deal with foreign exchange rates, as well as branch and ATM locations. It also beat ANZ that released a few APIs not related to transactional data on its developer hub.

Yes Bank

India’s Yes Bank leverages APIs to offer innovative solutions to its clients, claiming to be the first bank in India to launch API banking services. As such, APIs form an integral part of the bank’s value proposition.

Asit Oberoi, group president and global head of the transaction banking group of Yes Bank emphasises: “There were opportunities to really take API banking to its next level. So over time we would see YES Bank pretty much offering API banking to most of its corporates.”

For example, the bank recently implemented a blockchain and API-based solution for Bajaj Electricals and its clients. The solution aimed to reduce inefficiencies in the trade finance and financial supply chain, by providing a cost-effective and efficient means of automating bill discounting.

This added value for the client in terms of greater operational efficiencies, particularly through the reduction of the process cycle for bill discounting from four days to real-time.

The expanding role of APIs

The move towards open banking and the adoption of APIs by financial institutions, governments, fintech firms and other stakeholders has accelerated. With regulations increasingly being put in place, particularly after the implementation of PSD2 in Europe, regulators will adopt best-practices to bolster the adoption of APIs around the world. As more players recognise the benefits of APIs, and consequently, the importance of an API strategy in their digitisation efforts, the role of APIs will grow further, especially to facilitate the establishment of ecosystems, and come to shape the banking industry as it enters the digital age.

Keywords: API, IT, Open Banking, Regulations
Institution: MAS, CMA, Macquarie Bank, Fidor Bank, DBS
Region: Asia Pacific / Europe
People: Lui Su Kian, Asit Oberoi, Matthias Kröner
Leave your Comments
Recent Comments