Open Everything
11
min of reading
December 6, 2022

How APIs Improve the Digital Journey of Banks and Financial Institutions

Willian Pereira
Content and Communication Analyst
Journalist and content creator for websites, blogs, social media and other digital channels.
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The advance of innovation and the strengthening of Open Finance have defined the competitive landscape in the financial market, challenging institutions to offer new digital experiences that position their customers at the center of their strategies, driving new customer acquisition and delivering greater efficiency.

In this scenario, APIs offer much more than integration – they enhance the digital journey with agility, security and scalability by connecting legacy systems, digital channels, cloud services and partner ecosystems. They also pave the way for creating new products and opening new markets in order to increase the customer base.

To illustrate, we can base an API strategy for banks and finance companies on 3 key factors: digital experiences, partner integration and security and risk aspects. These are:

1. Digital experiences for customers and partners

In an increasingly digital age, offering fully integrated, digital experiences is no longer a differentiator but a basic principle of innovation strategies, especially when it comes to financial services.

User behavior has changed. The Covid-19 pandemic accelerated what was already expected: the faster, easier, safer and more convenient the service, the better. With Open models in full swing, offering this kind of innovation to customers and partners in your ecosystem becomes feasible thanks to APIs, which are responsible for integrating all the channels your business may have, such as mobile apps, wearables, IoT and smart devices.

In addition to enabling important technical issues such as:

  • Exposure of complex legacy applications and control and management of their data;
  • Microservices and API layer encapsulating the legacy;
  • Preparing the legacy for modernization;
  • Modern and more standardized manner of exposing services;
  • Centralization of all API transaction details;
  • Business dashboards that enable customer behavior analysis.

Banco Rendimento is a success story when it comes to enabling digital experiences and offering pluggable banking. One of the company’s main business channels for product and service consumption are the sets of services and APIs, which involve payment slips and cards with various bank transactions that can be done on an app and access to products via APIs.

Sensedia API Platform’s well-developed structure enables the delivery of financial products and services that will foster different businesses and create appropriate and customized financial solutions, based on the audience’s needs and perspectives. Click here and read the full story.

2. Integration with Partner Ecosystems

Aggregating partner data and offering highly customized services is one of the key elements of an Open Finance strategy, and with APIs it can be executed well.

In collaboration with various fintechs, banks can find various features and services to add to their offerings, expanding revenue streams, engaging customers, working with shorter cycles of experimentation and learning.

On the other hand, by collaborating with banks, fintechs can find a vast customer base, as well as the support of an established brand and economies of scale.

This collaboration between banks and fintechs enables the delivery of a superior portfolio of services and channels to a consistent customer base with more effective use of data and monetization, and facilitates the creation of new products and business models in a more open innovation environment.

Banco Original saw the BaaS (Banking-as-a-Service) platform as a key way to build a partner ecosystem to connect different areas of expertise, which consequently allows it to offer more financial/non-financial products. It also generates high transaction volumes and customer retention levels, as well as providing an additional source of revenue. Click here to read this story in detail.

3. Open Finance and Security Factors

APIs are strategic elements that enable the sharing of information and data in a secure, optimized and better connected way with partners and customers in Open Finance. It is critical to view APIs as part of business strategy.

Once your APIs are exposed while integrating with partners, you need to manage those APIs to make sure everything is connected securely in the right place.

In this sense, security is an important point — and governance is key in this regard. In this context, companies need to ensure that protection practices are implemented across all system interfaces.

Without Open Finance, only the banks you have an account with have access to your financial details, but once it can be shared, you need to be able to monitor and track this information. There are numerous risks: legal, regulatory, compliance and security issues.

APIs use high-standard security mechanisms that enable managed and secure connections, and consent management ensures that only allowed customer information is used and shared according to the consent given, mitigating data misuse.

By centralizing all customer data, institutions can better understand user behavior and analyze their level of risk.

Banco Bmg operates around these pillars and, known for being at the forefront of digital innovation, it opened its APIs to third parties, creating more partnership opportunities and a solid foundation for Open Finance. In June 2021, the institution registered a 28.2% growth in the last 12 months and saw the number of active account holders rise 240.5% to 4.6 million. Click here and read the full success story.

Sensedia’s platform promotes integration with security assurance and API governance through proper monitoring, reducing the risk of attacks and allowing a quick response to identified gaps. It also allows the IT staff to work faster by making applications less complex, allowing developer teams to focus on code that generates innovation for the business.

To understand more about API security, click here and watch our free webinar on the subject.

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