The future of digital banking (hint: it's not blockchain!)
November 30 2018

Money is the lifeblood of our society and banking is the heart. That's why we're so excited by all the innovation that's been going on in the banking sector over the last ten years. From mobile banking to Bitcoin, the world of banking is changing quickly, making money management and movement easier for everyone.


Blockchain especially is considered to be a game-changing technology for the banking industry. Japan and Thailand have already used blockchain technologies to establish a secure remittance service to boost the speed, efficiency, and safety of their currency transfers, estimating at an annual $250 million. Many other banks see blockchain as a faster, safer alternative to the SWIFT transfer protocol.


Whilst blockchain captures all the headlines with exciting new technologies like Bitcoin, there's another, less glamorous technology that's rapidly transforming the way that banks do business - APIs.


Initiatives like the Open Bank Project are quickly making APIs a secure, viable option to connect banks with each other and with third-party platforms and applications. The potential benefits of these kinds of secure interactions are astronomical, allowing brand new technologies to pair with existing platforms to bring incredible new functionalities.


What does it mean for banks?


The ability to partner with innovative new companies and platforms creates the potential for new banking revenue streams. Banks are aggregators of crucial customer information, and APIs allow customers to share that information with third parties to gain insight for better financial products, e.g. financial planning and forecasting as well as loan prediction. Also, as digital banking transactions become more prevalent, customers will require more and more ways to pay for goods and services. APIs facilitate these transactions, allowing banks to charge third parties for direct payment integrations.


APIs also offer the chance for banks to run leaner product launches, allowing for faster innovation. Instead of working within the existing architecture of their banking platforms, APIs enable bolt-on products that integrate quickly and easily. This means faster project turnover, a lower upfront investment and a more rapid evolution of products.


What does it mean for the customer?


APIs would allow other companies to integrate with banking systems, creating unlimited options for new functionality. Personal financing apps like Mint are already taking advantage of this technology, allowing users to connect with their bank accounts and manage specific aspects like budgets and financial planning. With APIs, it will never be easier or simpler to handle your money. As technology develops, there's also the potential for Internet of Things integrations that will enable even smarter products. Imagine a world where your smart home talks with your bank to let you know how much you're spending per month on bills.


Are there any risks?


Security is always the top priority for banks and for customers, and APIs are a potential vulnerability. However, standard security measures like OAuth provide adequate protection for most APIs, and partner-only API provision ensures only trusted parties have access to data. For banks, there is also the risk that APIs will enable customers to circumvent banks for their transactions, going directly to merchants for their transactions. To avoid this, banks will need to manage their integrations carefully.


All in all, APIs offer the chance for some exciting changes in the banking space. We'll be following industry developments carefully to learn about the exciting new products that will become available. Stay tuned!


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