An Open Banking API Can Transform Traditional Financial Services

Mar 8, 2021

Since the PSD2 regulation entered legislation across the European Union, financial institutions around the globe have mobilized to revamp their approach to information and data sharing. The answer has often been open banking APIs, which can monetize data assets and expand customer satisfaction in the process.

With open banking APIs, financial services businesses have recognized an opportunity for greater profitability and performance rather than just keeping up with compliance. In fact, 97% of U.S. financial institutions surveyed by Finastra agree that collaboration and data sharing with third-party entities and fintech companies can drive their business success. Here’s what your organization needs to know to unlock the full potential of open banking and how implementing API best practices impacts your results.

The Value of Embracing Open Banking Investments

For a business to reinvent its business model is a monumental feat even if there is an easy revenue stream lying within reach. Though financial institutions have gone through digital transformations, there are just some profit sources that digital-native or fintech companies are better equipped to leverage. Unless, of course, established firms are willing to partner with third-party vendors to mutually leverage each other’s strengths.

That is the key benefit of open banking. Where established firms are asset and capital rich, they lack the fearlessness or nimbleness to pioneer disruptive technology alongside traditional or engrained solutions. Yet by creating productionized APIs with clear documentation, financial institutions not only enhance their in-house transparency and data exchanges, but open up products and profitable partnerships.

The Capital One DevExchange was an early instance of a traditional financial institution pursuing third-party developers and organizations as a target audience. They created a portal with three open APIs that offered developers self-service registration, sandbox testing environments, documentation, and sample codes. Now, they’re far from alone. Solutions ranging from BBVA’s banking as a service (BaaS) to CitiBank’s API catalog help developers and promote revenue generation opportunities for the institutions that create them.

Let’s come back to Capital One for an example of the results. One of the early partners using Capital One’s offerings,, chose to integrate their Credit Offers API into their website, providing consumers with accurate and current data on credit card products. This helped consumers review credit card options to determine which was best for their lifestyle, preferences, and goals – increasing Capital One’s customer base along the way. This only scratches the surface of the possible benefits to businesses.

How to Encourage Companies to Use Your Open Banking API

It’s important to ensure that the APIs you create are appealing to those within your larger financial services ecosystem. Here are a few key considerations to ensure that your organization is maximizing the results of any open banking API implementations:

  • Target the right fintech partners – If you are going to create an open banking API, you want to make sure that there is a market or a use case for your implementation. If you follow the Capital One route, your organization can segment out the personas of developers who might be using your open APIs to deliver the ideal experience.Capital One’s decision to break down audiences into self-improver, business expander, technology influencer, revenue seeker, and enterprise operator enabled them to engage and motivate a variety of potential open banking partners. Feel free to create your own personas – as long as each one properly leverages your target users’ long-term business and revenue objectives.
  • Enhance the developer experience – This is a matter of accessibility. It’s vital for there to be high-quality documentation and even sample code whenever possible. If you provide developers with easier means to adopt one of the pre-built APIs from your catalog, they’re more likely to partner with you over a competitor.Moreover, the user personas that you create can help you build APIs that are more likely to appeal to the preferences and demands of third-party developers. Remember: you need to bring third parties to the watering hole before you can get them to work with your business and further your own opportunities.
  • Ensure proper security – As with any IT element that will be interacting with multiple systems and platforms, there is a potential security threat to address. Cybersecurity experts have monitored botnets scouring the internet for ENV files that have been left unsecured or exposed on web servers. These mistakes can disclose API tokens, which can give hackers access to sensitive or proprietary data you want as far away from their hands as possible.If your business wants to avoid broadcasting trade secrets or risking extensive fines, it’s important for your APIs to be aligned with your security processes and procedures. And rather than authorizing every potential user with carte blanche access, you should grant access to only trusted partners who you can verify or trust (in this case, a zero trust security framework doesn’t hurt either).

Unlocking the right partnerships

Though most financial service organizations recognize the need for their data to be collaborative, there is a concern that in-house teams are unprepared to harness the technology. A survey with Finastra indicates that 51% of respondents agreed that a barrier to collaboration was an internal lack of understanding or skills to achieve change. Working with the right partner, one experienced with API development services for financial institutions, can help you embrace the increasingly complex financial services ecosystem, using your data assets to unlock possibilities that would otherwise be outside of your reach.

Are you ready to unlock the power of open banking APIs and the latest innovations in the financial services industry? Reach out to w3r Consulting to implement solutions that balance compliance and profitability.




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