And why payments may be the ideal entry point
November 29, 2016 | by Charles Keenan
While banks traditionally have been slow to innovate, they are starting to adapt to the new world of APIs, following the lead of other industries.
“We have come to the realization that we are never going to be fast enough or smart enough within our own four walls,”says Steve Van Wyk, head of technology and operations at Pittsburgh-based PNC Financial Corp. “From an innovation point of view, the API environment overlays across your own environment and provides you a construct that continuously allows people to come in – from third-party development environments to fintechs – to invent on top of your platform.”
But first as a refresher, API 101. Short for application programming interfaces, APIs are sets of commands, functions and protocols that allow companies to better ‘talk’ to external systems such as marketplaces, social media and startups. APIs are made available by a company to make it easier for outside developers to fashion products to faster meet the needs of consumers. Facebook’s sign-in button is one example. Another is Amazon Marketplace’s Web Service API, which allows merchants to integrate data with Amazon, improve response times and lower labor costs. APIs issued by Apple allow for the ubiquity of apps on iPhones and iPads.
With APIs becoming a way of doing business in other industries, banks now realize they also need to make it easier for outside developers to help them innovate, especially since banking culture traditionally has stifled innovation rather than incubated it.
In the financial industry, APIs can assist with payments and transfers, managing account information and sending remittances. In treasury management, for example, APIs can allow for developers to create third-party dashboards that aggregate a company’s vast array of accounts into one dashboard, saving time from having to check balances across various providers.
On the retail side, there are more than a handful of examples. PNC is currently beta testing an API that allows customers to use Amazon Echo – the multipurpose hands-free chatbot – to handle banking tasks. Another API aims to get millennials to become more engaged with investing their savings, gauging their risk tolerance to come up with an asset allocation and recommendations among a suite of PNC investment funds. BBVA offers APIs to allow pre-authorized users to offer wire transfer services and access key account data to offer their own financial management services. And Silicon Valley Bank last year purchased API banking startup Standard Treasury.