Digital-First Banking

An API-Driven Fix To Digital-First Banking

The global financial space has been severely impacted by the ongoing COVID-19 pandemic, with social distancing and stay-at-home guidelines preventing customers from visiting bank branches to access the services they need. Financial institutions (FIs) have been scrambling to bring these services to web and mobile channels in response, and are partnering with FinTechs to make these changes as quickly as possible.

Application programming interfaces (APIs) are key to these collaborations, providing open access to bank architecture so apps can access data without needless back-and-forth. The development and deployment of APIs often runs into friction, however, including the cost of replacing legacy systems and lack of universal standardization among FIs.

In the May Digital-First Banking Tracker®, PYMNTS explores the latest in the world of digital-first banking, including the challenges facing deployment of APIs amid the COVID-19 pandemic, new online initiatives from nationwide FI chains and community banks and the security challenges that are plaguing digital banking programs.

Developments From Around The World Of Digital-First Banking

Small community banks play a central role in the lives of many consumers, and the COVID-19 pandemic’s economic downturn and social distancing imperatives are forcing these banks to take their services online. A recent survey of bank consumers found that online account openings at community banks have increased by 14.5 percent since March, when stay-at-home mandates first became widespread. This increase can also be attributed to government measures such as stimulus payments and the Paycheck Protection Program (PPP), which are driving individuals to open bank accounts to access these programs.

These online accounts are increasingly targeted by fraudsters, however, and many customers leave them vulnerable due to their poor password practices. A study of Canadian FI customers found that just 37 percent of respondents used separate passwords for different accounts, with 22 percent using two to five passwords for every account they had. Many FIs are turning to alternative security methods like biometrics in order to keep their customers safe, with 64 percent of Canadians saying they would allow their banks to gather data like fingerprints if it meant better security.

Biometric security systems are just one example of the major technological investments banks have made in recent years. Canada’s six largest lenders spent more than CAD $100 billion ($71 billion USD) combined on technology between 2009 and 2018, investing in check image capturing, electronic transfers, integration with digital payment systems and a host of other banking advancements. Many of these innovations are proving particularly useful in the midst of the COVID-19 pandemic, as they allow customers to access the financial services they need without risking infection by leaving home.

For more on these and other digital-first banking news items, download this month’s Tracker.

Commerzbank On The Benefits Of APIs Amid The COVID-19 Pandemic

Open banking and APIs are a key priority for the European Union, thanks to the revised Payment Services Directive (PSD2) mandating these initiatives for the region’s banks. One bank affected by PSD2 implementation is Frankfurt, Germany-based Commerzbank, which has been leaning into the use of APIs to develop its digital-first banking initiatives. For this month’s Feature Story, PYMNTS spoke with Christoph Berentzen, the FI’s head of API banking, about how Europe’s embrace of APIs has allowed banks to provide digital banking services to their customers as demand surges due to the COVID-19 pandemic.

Deep Dive: APIs’ Role In Fueling Digital-First Banking Innovation

Banks are working hard to provide digital-first innovations to their customers, and cooperation with FinTechs is a crucial part of these development efforts. These partnerships rely on easy access to bank data, however, leading many banks to rely on APIs to make this data access as seamless as possible and to drive FinTech collaboration. This month’s Deep Dive examines the benefits that APIs bring to the table — including accelerated payments, enhanced security and improved data access — and why their implementation is often impeded by a lack of standardization.

About The Tracker

The Digital-First Banking Tracker®, done in collaboration with NCR Corp., is your go-to monthly resource for updates on trends and changes in digital-first banking.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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