“Applications designed by a banker look like what a banker can imagine”. This is what Bernard Larriviere, director of innovation for Credit Agricole, told American Banker in a 2013 interview. He goes on to say that “We needed to have the customer’s point of view to … make us think about another way of creating applications to meet customer needs.”
Banking applications have had a difficult migration to the online world. They were initially a close mirror to the banks internal systems and felt like they had been created with the bank in mind, not the customer.
This has been changing recently and some banks have made great strides at providing excellent value-added tools on top of the basic banking functions.
Fidor Bank in Germany, which is 100% online with no physical branches, is a great example of a bank built for the modern age. However, innovation can be a serious challenge at many institutions, especially for those that have been around for decades.
An alternative solution to providing more innovative applications would be for a bank to open up its APIs to third-party developers. FinTech firms such as ourselves have been preaching about the benefits of an API for years. They provide an easy way for developers at other organizations to integrate and build upon our services.
Some banks have already taken steps to open up their APIs. For example, the CAStore by Credit Agricole, which has been around since 2012, has opened up its API for banking apps and in doing so has allowed developers to create new apps for its retail customers. It is essentially crowdsourcing ideas for new apps. Another example can be seen with the Barclays Accelerator program, where selected companies can access Barclay’s APIs. However, these cases are few and far between. In spite of the benefits publishing an API can bring, some banks cite concerns over security, risk management, and liability, which is understandable.
Publishing an API doesn’t mean that it would have to be open to everyone however. It should involve vetting potential partners and selectively opening up access to the API. A significant inhibitor is actually culture based. For years, technology development at a lot of banks has taken place mostly in house. It requires a big shift in mind-set to start collaborating on technology development with smaller firms but we may just start to see this happening at more institutions. For example, Innovate Finance, the UK government’s initiative to bring London to the forefront of the global financial services industry, is focused on both innovation in technology and connecting start-ups to more established players.
By 2016, Gartner predicts that 25 percent of the top 50 global banks will have launched a banking app store for their customers and cites how opening up APIs will be one way to do this.And it’s not only for consumer-facing services. It’s not something that will change overnight, but when it does happen it is likely to transform banking services as we know them.