Open APIs - the magical elixir?

Open APIs are finding their way into the payments industry.

They often facilitate the customer driven ‘opening up’of banks to the outside world in a secure, scalable, reusable and self-service fashion, thereby crossing the internal borders of technology silos and business silos of banks.

At EBAday 2016 the Electronic Alternative Payments Working Group of the Euro Banking Association (EBA) will publish an information paper on APIs and Open Banking, aimed at enhancing its membership’s strategic understanding of this important topic.

The paper starts by explaining the core business concepts and examples of APIs and defines Open Banking as a means to give customers more control of the products and services they consume and to foster transparency and innovation. With that in mind, the paper goes on in observing how openness could change the way banks think about product and distribution, two key dimensions in every business.

Value and innovation could be created increasingly in a distributed way, through an eco-system of partners, including fintechs. PSD2 compliance regarding the access to account provisions could be made part of the same effort towards Open Banking.

However, there is a perceived risk of cannibalisation and disintermediation, next to general reputation and compliance risks. New collaboration and revenue models could eventually push banks back in the value chain forcing them to deliver a smaller or less profitable portion of it. Are we really prepared to enter this brave new world?