3 Must-Dos for Better API Adoption: Part 1
- Seshika Fernando
- Vice President - Banking and Financial Services - WSO2
Photo by Sharon McCutcheon on Pexels
According to security experts, APIs now account for 80% of all web traffic. From 2020 to 2021, the average number of internal endpoints grew from 28 to 89, and those points handle increasing volumes of data. Their array of functions is always widening, and CIOs are becoming increasingly concerned with their potential for creating security breaches.
However, these tools are seen as worth the time and effort to build, maintain, and secure because they streamline business processes and integrate firms with customers and suppliers. Still, all this frictionless contact is predicated on one key element that is so basic it often goes unstated: APIs only work if people on both ends are using them. An adoption plan needs to be part of any digital transformation strategy.
This is the first of three articles, each focused on a distinct phase of API adoption. Today we examine the first phase: internal use. The next two articles will discuss the subsequent phases of external use with existing partners and external use with new partners. While those latter phases help financial institutions to provide access to supply chain partners, customers, and prospective customers, this first phase is concerned with ensuring that a bank’s information systems interior is welcoming enough to greet these guests.
At the end of the series, you should be aware of the stepwise process of API adoption and be formulating your own thoughts about how to best apply it within your institution. It’s OK if you don’t feel you can take what you learned here and run with it; this is a plan for a plan. Help is available to those who seek support in detailed planning and implementation of API adoption as part of a broader digital transformation initiative.
Guests are Coming: Here’s how to get Your API House in order
APIs comprise a critical element for digitizing any financial institution or, for that matter, any business. By providing stakeholders with on-demand access to accurate data, APIs make workflows faster and cheaper while improving customer experiences.
API adoption can result in dramatic increases in productivity, so the temptation might be to plow ahead with every imaginable project predicated on APIs. Still, as with any other digital transformation tool, a deliberate, stepwise approach is the wisest course.
- Ensuring that internal systems function seamlessly is the first of three phases of API adoption for a bank, followed by external use with existing partners, and then by external use with new partners.
- Phase one is concerned with automating and improving internal processes to boost productivity, centralize workflows, and mitigate the risk of a data breach.
- API adoption can eliminate redundant processes; know-your-customer (KYC) is one example of business activities where these can multiply if left unchecked.
- APIs enable omnichannel strategies, as well as the capability to add new channels on the go.
- Expanding customer channels through API adoption can lower costs by avoiding duplication of both infrastructure and effort.
- Using APIs to expand customer channels can increase revenues by increasing the number of customer touchpoints or even help establish a new neobank subsidiary.
You wouldn’t host a party without straightening your home first. Similarly, you wouldn’t invite your third-party stakeholders to access your systems until you’ve gotten your internal processes display ready.
That’s why phase one is concerned with automating and improving internal processes. When API adoption is turned inwardly, it boosts productivity and centralizes workflows on virtual machines, all while adding a layer of mitigation against the risk of a data breach.
One example of successful API adoption for internal use comes from Karnataka Bank, a leading financial services provider in India. Before proceeding to a wider array of interfaces, it built APIs to modernize core processes that had been handled manually. This simultaneously broke down siloed systems, standardizing and integrating services across the bank.
Another key benefit of improving workflows through internal API adoption is that, aside from streamlining critical processes, it can eliminate redundant ones. Nowhere is this truer than in sharing KYC data, across multiple products and systems. KYC is a legal mandate, so there is a tendency to err on the side of compliance. If a customer desires multiple products, this could lead to collecting the same data multiple times and storing it in several locations. APIs, though, enable the data to be shared – securely – wherever needed.
If there is a weak point in the business case, it is this: Improving workload does little to increase revenues. It prepares the institution to do so. The work performed provides the experience and confidence the DevOps team will need to take on revenue-enhancing projects. But this will not in itself accomplish that business objective.
That doesn’t mean you shouldn’t do it. Anyone who has gotten anywhere in IT management in the financial sector has learned how to generate a revenue-neutral business case. But fortunately, there are opportunities to enhance revenues even in this first phase, which we’ll get to in our next article.
Expanding Customer Channels
Your bank has probably already adopted the sound marketing strategy of meeting customers where they are in terms of interfaces. Technology needs to follow that lead and enable greater intimacy. Automated teller machines get you only so far, and you’ve probably been there since the 1990s. Now the entire bank must fit on a computer screen, an HDMI screen, a tablet, or a phone.
APIs make such an omni access experience possible. They also enable you to add new channels on the go as people decide they want to do their banking in their messenger apps, their video games, the metaverse, or whatever comes next.
As with workflow improvement, expanding customer channels through API adoption can lower costs. With the judicious deployment of APIs, infrastructure need not be duplicated every time a channel is added. This saves not only hardware, software, and facilities costs, but also on highly skilled, highly remunerated employee costs. Software and network engineers, already in scant supply, can be redeployed to other value-added projects.
But here’s the really good news. As I noted earlier, expanding customer channels via APIs can directly impact revenues. One byproduct of this work is that a number of bank-owned customer touch points are created, each with its own contribution to revenue growth. In fact, an entire neobank subsidiary could be created and launched, if that’s what the branding specialists desire.
The market appears to be there. According to McKinsey & Co., public-facing APIs account for the smallest quantity of these interfaces – and yet the fastest-growing. That’s a point you can share with your top management!
Once your internal processes have been sewn together and are poised for expansion, then comes the time to discuss how these newly refined skills can be brought to bear on external-facing systems.
The next two articles will discuss the subsequent phases of API usage with existing and new partners.
In part two, we’ll look at how sharing APIs with service providers and large corporate customers can lead to lower costs and higher revenues. We’ll then follow that with a look at the final steps toward API adoption: streamlining the APIs and enabling the bank to onboard new partners on the go.
Get in Touch
WSO2 can help plan and implement each of these phases in turn. But just as you must do with your customers, we need to meet you where you are now. Where is that? Let me know.
Leave a comment below or email me at [email protected], and let’s discuss the next steps for API adoption for your institution.