Online banking 2.0 with API
When you think of the new era in banking — let’s call it “Banking 2.0” — what do you see? Is there something revolutionary such as totally virtual branches or no paper money at all? It’s hard to tell how Banking 2.0 will exactly look like, especially with virtual reality (VR) sets going mainstream, but surely it will be something different from banks as we know them. The keyword to this change is very short: API.
APIs are small yet powerful tools to reach data stored in banks and other financial institutions, and mine it to receive simple yet trustworthy answers, or to further process and analyse it for big data trends and patterns. Thanks to APIs, a new information exchange network will emerge, allowing for smooth and secure flow of data among very different businesses using banks as their core service providers.
Cut the branch
Let’s start with something basic: branches. Will they be needed when a simple API can retrieve all necessary personal information within seconds after a customer logs into his/her account in a bank, which has already performed the KYC procedure and has stored verified, trusted details about its client?
Well, this means that some banks will still have to bear the burden of running brick-and-mortar branches just to be the source of legitimate information on customers, while the competitors will be able to ditch their street offices completely in favour of leeching on others’ infrastructure and KYC processes. And by using latest technologies such as VR they could even simulate a real person-to-person interaction. This means a massive cut on costs, which, in turn, leads to better deals for customers.
At first, it may seem unfair, but this “trusted party” service can be profitable to banks running the infrastructure. They still will be the money keepers – even a virtual bank or a brokerage house has to deposit its funds somewhere.
This data exchange among different parties via APIs also secures the financial ecosystem as it protects from frauds. A faster and more reliable KYC procedure allows better guard against criminals, and data analysis from different sources can detect potential scam schemes.
BYOB: build your own bank
APIs are also powerful in the way they can enrich existing “boring” bank services with totally new, exciting features and change the whole game. It’s possible that APIs will transform the financial world into a kind of hardware/software hybrid: there will be infrastructure providers (banks as “trusted parties” with all the gears needed to keep the money and data safe) and service providers (third parties offering services, solutions and customer care based on APIs to infrastructure providers).
A bank can have just basic, simple services, but the third parties will do the rest, providing all conceivable features using just APIs. These building blocks could be put together by a bank to make a comprehensive and branded offer with a unified look and feel, or by a customer who would pick whatever he/she likes and needs to create a customised banking experience.
With the third parties making “plugins” to an existing framework thanks to APIs it’s almost certain that we will witness a complete overhaul of banking from a user perspective. First of all, clients will no longer be bound to proprietary bank apps and websites. They will be able to use the e-banking interface of their preferences, with features they demand.
Secondly, customers will get new services, tools and options to choose from, all based on APIs, so they will be more likely to use online banking for activities other than just checking their balance and making money transfers. Quick peer-to-peer loans between friends or complete strangers? Raising funds for a cause directly from a social network? Identity checking or age verification on various sites (both online and offline)? It’s all within the reach of our hands, literally.
It’s next to impossible to predict the exact shape of the Banking 2.0 era. Maybe it will be totally virtual, with branches more like kiosks than offices; maybe it will be less about savings/loans and more about financial activity in different areas. But with APIs it will definitely be different from what we experience today.
By Konstantin Rabin, head of marketing, Kontomatik