For financial institutions investing in application program interface (API) solutions to help customers gain access to new services, it pays to open up the sandbox to others.
Several major banks, including Citi and Standard Chartered, recently launched their own APIs to help their various clients access each banks’ financial toolsets to address their individual needs. Other financial institutions and businesses are also seeking to invest in API solutions to engage with their customers.
For example, some businesses are turning to APIs to offer eCommerce solutions to help them tap into the online market which, by some accounts, is expected to be worth $1.3 trillion by 2020 in terms of B2B transactions. With such a staggering amount of money up for grabs, it’s little wonder that SMBs are seeking solutions to tap the online market’s potential.
As more players seek new solutions to address clients’ needs, companies are turning to developers to produce new solutions offering wide-reaching potential. Some institutions, like U.S. Bank, host hackathons to motivate the developer community to build these tools.
PYMNTS recently caught up with Dominic Venturo, executive vice president and chief innovation officer of U.S. Bank, who discussed the bank’s experience with hackathons and what types of innovations these events have produced so far.
Hacking the Future of APIs
Venturo said U.S. Bank has held hackathons among its own internal team for the past two years. In a 2016 blog post, he outlined how the bank’s internal hackathons challenge employees to use the bank’s services as if they were a customer, finding ways to improve them and offering funding to move the solutions forward.
The bank also holds a two-day external hackathon called “Think Big, Hack Small” for approved third-party providers, enabling participants access to a test environment to experiment on potential solutions. The test environment allows participants to build new products — like mobile apps or Amazon Echo-specific solutions — to get a sense for how they will perform in a non-simulated environment.
Last August, both U.S. Bank’s and Mastercard’s APIs were available as part of the developer portal at U.S. Bank’s “Think Big, Hack Small” hackathon. The participants were encouraged to develop solutions aimed at helping the small business community.
At this event, U.S. Bank awarded a $10,000 prize to a team of developers that created a mobile app aimed at offering restaurant patrons an innovative new way to split a check. The app, called Undutchly, is a video game in the spirit of “credit card roulette,” intended to help a group settle a restaurant bill. Instead of a roulette wheel, users’ card data is tokenized and tucked away in one of several hiding places on the screen. After all the cards are “hidden” in the game, a digital iguana called Iggy Burritozilla eats the available items until a user’s card is discovered. The winner (or, more accurately, loser, depending on the user’s interest in paying a group check) then has to pick up the tab.
Beyond the winning team, Venturo said the hackathon highlighted the bank-related solutions developers can produce from APIs during a short period of time. For example, another team produced a solution enabling merchants to verbally ask Amazon Echo questions about the businesses’ account balances and other data.
“They came up with a variety of interesting ideas,” he said. “But the important part is they proved they can actually work, and they did that in 24 to 36 hours, which is pretty awesome to see and experience.”
Eating Your Own Dog Food?
Venturo said collaborations between FinTech companies and the financial industry has produced several notable developments in the last few years, such as mobile payment solutions, wearables, tokenization, blockchain and biometric tools. And, ultimately, banks that collaborate with FinTech companies (and with one another) can deliver new solutions to market that make banking easier for their customers.
For banks and other financial players interested in investing in new developments, Venturo encourages these institutions to just “start doing something.” A good way to start, he explained, is for companies to look at their own API offerings to see what innovations can be produced, instead of what developments could come from external players.
“I think it’s hard to learn just by studying,” Venturo said. “You have to learn by doing, and you have to get some practical practice.”
Venturo described U.S. Bank’s approach to APIs as “eat your own dog food first.” In other words, companies should experiment with their own offerings before making them available to customers. Doing so, he said, will shield customers and partners from potential risk or awkward user experiences if a product or solution does not work as it was originally intended.
And, when possible, it helps to get the customer involved early on. In 2015, U.S. Bank held Proto Jam, an event that invited small business owners to share their biggest banking issues to help guide the bank’s developers toward finding new solutions. As a result, U.S. Bank was able to introduce solutions like mobile check deposit and payments and biometric solutions like fingerprint- and voice-based account logins, Venturo said.
Focused Effort, Multiple Applications
For companies and institutions that are interested in investing in API solutions, Venturo said it pays to have a focus. But he also noted that efforts focused on one product or solution can be developed once and then reused across other platforms. This, he said, reduces the development time required for common functions and can improve the reliability of the service.
For example, he said a few years ago the bank built out API capabilities to share data surrounding the bank’s branches, ATM locations, hours and capabilities with other developers. Making the data available externally through the API enabled U.S. Bank’s branch and ATM locations to be displayed on Google and Bing maps using a mobile device. The API solution was also able to be paired with a separate solution that displayed the locations and hours of small businesses and special promotions in proximity to the bank’s locations.
“Rather than having to build that functionality into the mobile app, which would have been time-consuming because the APIs already existed, we’re able to re-consume them,” Venturo said.
Instead of building an API for every occasion, Venturo recommended companies look at their most common technology integration points to determine what parts of the system could benefit from an API solution with multiple use cases.
“Being able to reuse your own internal product development purposes is another value-add that I don’t hear much about in the industry,” he said. “But it’s definitely a benefit-driver.”
Taking Cautious Risks
Making significant changes to a major part of a business, such as updating an HR system or accounts receivable and purchasing tools, can carry big risks. For hesitant businesses seeking new solutions, Venturo encourages innovation investment plus a focus on running decisions through a test environment to plan for the worst-case scenario.
“The way you get comfortable with the concern is to go through the contingency planning and develop your risk mitigation plans for all of those contingencies,” he said.
Taking a hard look at where new solution implementations could go wrong will help companies stay ahead of the unexpected, said Venturo. Companies that invest the time and attention in testing the new solutions could open the door to new possibilities.
“If a company is going to invest in these things, they have to be managed and maintained in a way that’s no different from any other product the company offers,” he said.
This means that the APIs need to be kept current as other technologies advance. And companies interested in APIs must be prepared to put in the hours and accept the risks that come with change. Inviting other players into the developer sandbox — from FinTechs to developers to customers — may be the best way to stay on top of those changes.
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The PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the segments that comprise the B2B API ecosystem.