Channeling APIs To Stay Compliant With Regulators

Legacy banks have a problem. FIs are embracing APIs to offer customers new features – but aren’t necessarily meeting customer expectations. Fredrik Hedberg, CTO and co-founder of Tink, says FIs can offer better products by drawing smarter insights from their customers’ data. In the latest B2B API Tracker, Hedberg tells PYMNTS how banks can pair lessons from their consumer-facing business with data to build better banking APIs.

Across the board, banks, credit unions and FIs are turning to new tools that rely on AI and machine learning. These features give their customers data-driven insights that can improve their financial lives, and FIs with legacy infrastructures have been using APIs to make such new offerings available.

That’s beginning to change, however. FIs are now embracing development of their own APIs, using firsthand experience to build valuable products they believe consumers want. That growing group of FIs includes Sweden-based FinTech Tink, which offers a consumer-facing digital banking platform alongside a growing B2B API development business.

Founded in 2012, Tink debuted its AI and machine learning-focused digital banking platform the following year to give customers better financial insights. It quickly realized that the technology it had built for its own users had become highly sought after by other FIs around the space, according to Fredrik Hedberg, Tink’s co-founder and chief technology officer.

“We’ve found, over the last few years, that a lot of the technology we build for ourselves and for our customers is — for everyone from blue-chip banks to FinTech unicorns to smaller niche banks and FinTechs — really valuable,” he explained.

In a recent interview, Hedberg told PYMNTS how Tink began to shift its focus toward becoming not just a consumer-facing app, but also a technology company. The firm now offers a wide range of tools designed to give banks access to consumer account data and other insights, and in the process has given itself a new revenue stream.

Connecting Banks to Customers

Tink’s business model previously called for partnerships with and licensing of its technology to large banks and FIs, but it debuted its API platform to the market in April. The offering connects third-party developers with financial data and information from more than 300 banks and FIs in Europe, and pairs that data with AI and other technologies to assist any FI providing a feature built using the Tink API.

“On an infrastructure level, we connect with hundreds of banks across Europe to provide things like account information, transactional data and other information,” Hedberg said. “We then leverage that data using machine learning, algorithms and other technology to provide data-driven advice for end users.”

The idea was to be the “Stripe” of API platforms, he added. Tink wanted to create a financial information network that could enable anyone to start building data-driven banking products, and continue the company’s evolution toward building features based on consumer banking customers’ expectations and demands.

The Future of Open Banking

API use cases can go far beyond just analyzing financial data, however. They are increasingly being utilized to help banks prepare themselves for the impact of the General Data Protection Regulation (GDPR), PSD2 and other future open banking protocols, Hedberg explained.

Tink’s API platform was designed to help banks and FIs prepare for the arrival of new regulations as they roll out. These guidelines call on banks and FIs to give customers increased control over their data, and force companies to comply with customer requests to delete their data.

“It’s already starting to become quite obvious that the smartest — and most progressive — banks out there have realized that the features these FinTechs have built over the past few years could be made even more valuable in a big bank setting,” Hedberg said.

He believes complying with regulations like these will only become more important in the coming years, and expects regulators to continue their push to protect consumers and their data as technology continues to evolve. Paired with increased demand for, and a sense of security with, data-driven banking tools, these regulations will mean the demand for API-based solutions will only increase in the near future.

“The good news [these guidelines] have for us is they instill confidence in the larger banks,” Hedberg said. “It means a lot of Tier-1 banks are going to feel confident enough to do the kinds of things that consumer-sided banks like ours have been doing for the past few years.”

If Hedberg’s experience and predictions are any indication, APIs may be set to become an even more crucial tool for FIs in the months and years to come.

About the Tracker

The B2B API Tracker™ 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.



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