Open API adoption across Banking & Financial Institutions in the middle east
"Open", "Open APIs", "Open banking" have become catchwords over the past years with digital transformation occupying the center stage in many sectors, including banking.
The banking landscape in the region has been undergoing a transformation over the years. The FIs are not only moving towards opening their services, but also crafting their own digital ecosystems and engaging in external ecosystems. Changing consumer trends, the want for consumers to fully control their finances and accounts under one view, and an improved range of services customized to them are the main drivers behind the FIs adopting Open APIs and moving towards open banking. The banking industry in the GCC has recognized that the transformation of traditional product-centric distribution to services providing deep financial insights and integrating services of other sectors can only be achieved by creating an open API ecosystem, which is beneficial to both the banks and the customers.
Why Open APIs?
Open APIs enable better financial transparency and supports FIs to transform and create new and customized services for their customers. With shifting regulatory dictates, open banking has been slowly making inroads into the region. Some of the benefits offered by Open API include:
API’s introduction within the banking service supports both customers and businesses that give them the liberty to access all banking data in real-time. It offers them more exact and up-to-date information on their finances.
Open banking gives financial services access to more information about customers to make a more compelling experience where possible.
Open APIs will enable fintech companies to access bank data and functionalities, thereby bringing a profound change within the digital banking ecosystem. This will also bring forth potential partnerships within the financial sector.
Technology tool and approaches that can help FIs in the Middle East to implement Open Banking
Based on some recent surveys, it has been noted that FIs in the region are implementing or looking to implement open APIs.
However, for Open Banking to realize its full potential, technology such as the cloud is required as it can enable scalability and accessibility.
This enables financial institutions to avoid the burden of managing infrastructure on-premise and to integrate third-party fintech creativity via APIs. Cloud can also enhance operational efficiencies through improved automation and resilience.
In a way, these benefits will affect the way banks develop their operations. There are many banks that are still operating on-premise, but more and more banks are moving towards a hybrid model for cloud applications such as CRM and HR, linking these to their on-premise core.
Several established banks have started to utilize private clouds, where they can benefit from the distributive processing power that cloud provides while moving off-premise and simplifying their IT infrastructure.
Some technical considerations the FI institutions should take to have a successful API strategy
What is critical to a successful API strategy, is the understanding that an open API is not just a commercial business venture but also in understanding the importance of technological capabilities in this transformation.
For starters, stop thinking of this transformation as just another technical IT project. Ensure that the APIs are carefully monitored so that users can be monitored continuously, and rapid action can be taken upon these metrics. Upon need, APIs should be quickly changed However, it is important that even if an API evolves, the API format (the request and reply interface used by the external parties) should not change drastically or in any case, should be able to support old versions of the format. This is to avoid all partners adapting their software when a new API version is delivered. It is crucial to create a developer community that will be supported by development portals, allowing for a seamless developer experience. Such a portal should provide: Easy and fast onboarding (ideally through self-service access) without much intervention from the bank. Detailed documentation of the APIs (through Swagger), for instance, API should be self-explanatory. A sandbox to test the APIs, including an explanation description of the test data available in the sandbox Cross-platform SDKs and other tools (for instance, sample applications, sample source code ) to cut down the time and effort of third-party developers to consume the APIs. A successful API strategy should not only focus on the outbound APIs, i.e. the APIs exposed by the financial service company but these companies should also have a strategy of using APIs from other companies(like Fintech companies), as this will allow rapid creation of new services, by building further on functionality exposed by partner companies.