‘The API economy’ is a term that has become increasingly popular in recent years and is now a vital part of the technology landscape, as well as a key concept.
We are also witnessing companies basing their entire business model on this concept by consuming services from these providers.
Uber’s solution uses APIs from mapping, communications, and billing providers with their own UX on top. This is based on the school of thought that it is easier to launch new services which do not need to be built from scratch.
Travel aggregator sites use third-party APIs to display the best airline and hotel deals. Not only do they present deals, but these deals can be booked and future recommendations can be provided - all from the same website.
Streaming services like Spotify and Netflix use APIs to distribute content. Car manufacturers like Tesla send software updates directly to vehicles via APIs.
So how are Nordic banks stacking up against these API industry innovators?
There is little evidence that open banking APIs have had a significant impact on bank revenue. Use of PSD2 APIs is increasing and PSD2 has probably been a catalyst in this area. Yet again, we see an example of Amara’s Law: ‘We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.’
Tietoevry has a long history of providing services to a long list of banks in the Nordic market, particularly core, payment and channel solutions. In a model where the banks have achieved cost sharing through partnership with Tietoevry and other banks, this has been a useful strategy for a service which some primarily consider to be a commodity.
There has been an increased focus on the role of traditional banks in the digital age. Rules and legislation, changing customer expectations, rapid advancements in technology, and new competitors are forcing traditional banks to rethink the way they operate. Tietoevry wants to embark on that journey with our customers and their partners.
We recognize that banks differ from each other and desire varying levels of differentiation and flexibility. Some smaller banks may be happy with standard channel products, while others have identified competitive advantages that lead them to expect more tailoring of their digital output.
Tietoevry is convinced that APIs will be essential building blocks, as banks look for new ways of distributing their services in search of further growth. However, offering banks and their partners superior APIs will only take them part of the way. Structure, process and ease of use and access are needed to make this model truly work; step forward, API management.
API management may be summarized as the process of designing, publishing, documenting, and analysing APIs in a secure environment. API management solutions guarantee that the public and internal APIs created by organisations are consumable and secure.
Integration efforts can easily become messy, cancelling out the potential benefits of adopting APIs, unless there is a robust platform for managing APIs.
API platforms help manage APIs at scale. They are useful for abstracting the many administrative pain points associated with integrating APIs and help increase the visibility and performance of APIs and ensure smooth and secure consumption.
A good API management platform offers centralized governance of your APIs, and you can understand their evolving requirements and enhance their security.
If you have a complete and organised view of your APIs, you can monitor their use more quickly and respond to any integration challenges.
The key capabilities of an API management platform are:
The API gateway serves as a single point of entry for all third-party clients, as well as playing an important role in securing API connections
The developer portal provides a hub for developers to access and share API documentation.
API lifecycle management provides a system for building, testing, onboarding, and managing APIs while safeguarding version control.
Analytics capabilities offer business owners and administrators insight into the volume of traffic to APIs, what drives that traffic, and the performance level.
API monetization allows API providers to package, price, and publish their APIs, so that partners and developers can purchase access or participate in revenue sharing.
Tietoevry is confident that API Management and API Marketplace are strategic bets that will realise major value for banks and financial institutions in the years ahead.
Banks and their partners expect to be able to draw on a wide range of banking-related APIs, and to do so from a platform that is secure, easy to use and capable of monetization.
Eager to learn more? Contact us!