Open APIs: A Strategic Opportunity for Banks

Navigator Edition: March 2017
By: Greg Vallach

The financial services industry is adjusting to meet the needs of consumers who want to manage their finances as easily as they request a ride from Uber. Often that innovation is being driven by agile fintechs using digital-first platforms while traditional financial institutions are encumbered by legacy systems. As such, banks should consider open API libraries as a means to bypass legacy infrastructure, engage with external developers, and provide innovative solutions.

Open API libraries can provide a bridge to fintechs by allowing third-parties to access bank data and build applications that integrate with bank software. Through these libraries, banks can control what proprietary information is made public, who has access, and ensure use cases can be aligned with a bank’s strategic objectives. This type of API-driven partnership can prove beneficial to both parties. For banks, open API libraries help circumvent inflexible legacy systems and leverage external resources to offer differentiated products and services to their customers—without losing control over their customer relationships. For fintechs, they expand their potential reach by providing access to established customer bases under the auspices of a bank brand.

The move toward more open bank architecture is already underway (see Figure 1). Capital One’s DevXchange developer portal, for example, provides developers with four APIs that provide different types of access to the bank’s data. One of these APIs allows third-parties to match customers with personalized Capital One credit offers after gathering a limited amount of customer information. This use case highlights the potential for mutual benefit – Capital One gets an additional sales channel, and the external affiliate (e.g., is compensated by Capital One when their customers are approved for the bank’s credit products.

Figure 1: Examples of U.S. Banks Leveraging APIs

Source: Company websites and First Annapolis Consulting research.

As competition in the financial services industry continues to intensify, banks will need to find ways to increase their agility and keep pace with market innovations.  Curated open API libraries represent an opportunity to leverage external developers to deliver new solutions faster and more efficiently. While open API libraries are still relatively new in the U.S., building API capabilities and developer relationships today could help financial institutions better compete in the future.

For more information, please contact Greg Vallach, Consultant,, specializing in Payments Strategy & Innovation.

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