Until recently, financial services were dominated by the urge to avoid risk. Today, it is all about the customer experience. The drive toward the customer experience has forced banks and other financial service providers to go digital, and fast. This trend has been accelerated by the breakthrough of FinTech players in the market and, of course, by the pandemic.
Digitization has changed consumer attitudes forever. The way we consume entertainment, the way we shop – everything has gone mobile. Financial services have been forced to follow that trend. Today’s consumers expect to find financial information and services readily available. Market demands are requiring financial services companies to make data more easily available and to develop new applications. But the agility required is at odds with the legacy infrastructure at traditional banks. The good news is, software in general, and application programming interfaces (APIs) in particular, can propel financial service providers into the future.
Open Banking: Challenge and Opportunity
This openness has become an obligation in some countries. Payment Services Directive Two (PSD2) is European regulation that in part is pushing banks to exchange customer data with third parties. Fortunately, banks are turning this challenge into an opportunity. European banks are building digital ecosystems that complement internal services with third-party applications to offer customers a broader portfolio of services. As Jean-Louis Van Houwe, president of FinTech Belgium, explained during a recent Wipro webinar, traditional banks have taken the opportunity to partner with FinTech players. Traditional banks are now offering many different services through a mobile app, ranging from financial services, to spending meal vouchers, to buying parking tickets, and paying for public transportation, etc.
APIs are the Glue Between Old and New
Open banking would not have been possible without the advent of API technology. APIs unlock the data hidden in the closed financial services systems and allow banks and other financial services companies to connect new applications to back-end systems – both third-party and internal bank services.
At Wipro, we partner with MuleSoft for APIs. MuleSoft’s API-led connectivity platform, Anypoint, allows an IT department to develop APIs and manage the entire lifecycle while also connecting APIs across different layers in the organization. Financial services companies can use Anypoint to leverage the power and data of the existing infrastructure while protecting the bank’s investments. What’s more, once functionality is built in the form of an API, it can easily be reused, saving development time and expense.
APIs at Work
HSBC used MuleSoft‘s API platform to build the bank of the future. By making the APIs available to business partners like real estate agencies, HSBC enabled the agencies to offer customers a seamless experience of buying a house and getting a mortgage without going to a physical HSBC location. To the customer, this is all fully transparent. The bank is hidden but delivers services through its ecosystem.
Likewise, Farmers Insurance used APIs to digitize insurance claims and payments. A claimant can take photographic evidence of a damaged vehicle and upload it directly in the Salesforce application. The claim adjuster can look at the evidence of the damage, estimate the claim value, and pay it directly to the claimant or to the garage performing the repair work. All of the connections are made through APIs, unlocking the internal systems of Farmers Insurance and providing customers with a seamless customer experience.
Bridging the Differences
The challenges for banks and other financial services organizations are huge. They have to strike the right balance between being very safe and agile, protecting investments and innovation, and being open and secure. Software, and APIs in particular, are providing a solution that offers the best of both worlds for the financial services industry.