APIs to Drive Banking-as-a-Service Growth in 2022

Amid the pandemic, banks have had to get creative to meet customers’ demands for new products and an increasingly digital experience.

Matt Naish, head of Product Strategy at FISPAN, told PYMNTS in an interview that application programming interfaces (APIs) are critical for helping financial institutions (FIs) create the online products they need to meet customer demand.

In order to streamline innovation, the percentage of banks and credit unions (CUs) that have invested in or developed APIs has grown from 35% in 2019 to 47% in 2021. Another 25% plan to invest in or develop APIs in 2022.

See also: How Open Banking Growth Impacts Business Banking Prospects

Moving on to the next generation of digital banking means that it’s becoming increasingly important to differentiate between the digitization of an existing product and a wholesale reimagining of it.

Or as Naish put it: “Digitizing is not really just making a standard paper form available online — it’s actually a reworking of the customer journey.”

This gives banks a significant opportunity to redefine how they interact with customers, automate the processes that can be automated, and free up resources to boost customer service and one-on-one interactions.

“Let the robots do what the robots do best, and let the humans do what humans do best — with a level of personalization and great service,” he said.

Pushing and Pulling Into the Future

There’s a push-pull dynamic that leads the financial services ecosystem toward innovation, he said. Customers are demanding more from their FIs, and so they are pulling these enterprises into new product and service development cycles. And when it comes to pushing out new digital experiences, banks must meet individuals where they want to be met, on the devices they wield most often.

APIs are the common denominator underpinning it all, he said.

“There is a lot packed into those three little letters,” said Naish. “APIs have grown well beyond the initial definitions and use — where it was just about getting things from one computer to another.”

Banks can use APIs to get the proverbial plumbing in place to enable new digital experiences, where, for instance, data can be consolidated into data lakes, and at a high level, bring digital experiences to life, he said.

See also: Open Banking APIs Help Corporate Clients ‘Get In, Get It Done And Get Out’

Building those comprehensive digital experiences can come through in-house development or through a partnership model, Naish said.

“You can draw on all parts of the ecosystem,” he said of the banks.

APIs and streamlined development can also level the playing field, so to speak, across markets that may have previously been burdened with legacy infrastructure.

The Rise of Open Banking and BaaS

As open banking (in its regulated and unregulated forms) takes root, Naish said that FISPAN will continue to build out its API platform in partnership with FIs. The FIs that pivot and extend their innovations, with quicker time to market, will have a first-mover advantage in shaping open banking and Banking-as-a-Service (BaaS).

A growing number of banks are developing BaaS strategies, noted Naish.

For commercial entities that adopt BaaS, there is an opportunity to cement customer loyalty among individual customers and commercial clients.

As Naish told PYMNTS: “If you build a model where you’re able to serve up not only your own digital offering, but offer that up to other entities, that’s a winning strategy for a number of different institutions.”