The Magical Mystery API Is Waiting to Take You Away…Waiting to Take You Away

Wednesday, September 21, 2016

Posted by Dan Ring to Payments and Industry Trends

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There’s nothing like a good mashup of a Beatles song and technology, right? We all know the Beatles, but do we all know APIs? To butcher another Beatles song, ‘All you need are APIs, APIs are all you need.’ At least that’s what it seems like, especially in today’s vast finance industry. Before we quote any more songs, we should first define what an API is. According to our friends at Webopedia, Application Program Interface (API) is a set of routines, protocols, and tools for building software applications. An API specifies how software components should interact and APIs are used when programming graphical user interface (GUI) components.

Now that’s what I call a scintillating definition!! And speaking of scintillating, ladies and gentleman, the Beatles (uttered in my best Ed Sullivan voice)…I mean, ladies and gentlemen, the Ranta!

So Mark, are APIs the biggest thing since the Beatles and sliced bread combined?

First off, you can’t really compare anything to sliced bread, as the sandwich is beyond comparison, especially if the sandwich features Pastrami (see the above photo)...”now going for the trifecta!” But I digress.

In our industry, the “next big thing” has been blockchain and the distributed ledger. APIs give us the ability to have something tangible near-term, whereas blockchain and distributed ledger technology are still a decade-plus away from having meaningful impact (across our industry). With blockchain, we’re creating an entirely new ecosystem, hence the lengthy timeframe for when it might come to fruition. APIs give us the ability to enhance the banking and payments ecosystem today; like right now, banks can begin to extend their current offerings, and take advantage of emerging opportunities. I guess to that extent, it’s like our industry’s British invasion. Pop wasn’t new when the Beatles came around, and APIs aren’t new either. The Beatles and APIs just reinvented the way we viewed these respective areas and created massive amounts of excitement in the process.

Other than being the Beatles of financial technology, why else are APIs intriguing?

What’s exciting about APIs is that it’s not pitting banks against fintechs—APIs allow us both to leverage each other, leading to a win/win/win/win—the banks, the fintechs, the merchants, the customers.

It’s like the Red Sox and Yankees or the Patriots and (all other NFL teams) getting along, working together?

It doesn’t seem normal for the Sox and Yankees to hoist the World Series trophy together, but that’s what we’re talking about… and the fans singing ‘Dirty Water’ and ‘New York, New York’ with “hands…touching hands…”

Hmmm…Neil Diamond, the Beatles, Sinatra and The Standells… great range in that playlist of yours! So some last thoughts before we leave dancing to a standard…what’s the difference between Open APIs and APIs? Are they interchangeable?

All squares are rectangles, but not all rectangles are Open APIs.

You lost me.

When we talk about sensitive financial or personal data, protection is absolutely critical. When we talk about ‘open’ with regard to APIs, it’s not straight-up open source; rather, it’s limiting data access to only verified third parties. Moreover, some banks create Open APIs for internal purposes only.

Is there a risk for banks to do this?

There’s a level of risk with ANYTHING and EVERYTHING, but banks have to evolve and APIs are a perfect example of a toolset for banks to evolve. We’re seeing more and more financial technology firms come onto the scene everyday, creating new innovative solutions that are slowly eating into the market share of banks, not rapidly by any means but certainly beginning to erode at the edges. I think that’s why you’re beginning to see more collaboration with FinTechs and Banks. But as with any collaboration, there is a level of understanding that is needed in terms of the partner, and that the partner meets the security requirements that are inherent when dealing with data that is as confidential as one’s finances and personal information. At the end of the day, though, the risk is acceptable if the client demand is there…and at the end of the day, this is moving to a truly customer-centric industry, which means that convenience will trump certain security risks.

So it sounds like you’re bullish on open APIs. What’s on the near-term (and long-term) open API horizon?

Now that PSD2 has moved front and center, a lot of the industry is already exploring and utilizing open APIs to meet the regulatory requirements, which is why it will be THE hot topic at this year’s conferences—from SIBOS to Money2020 and everything in between. Open APIs, Open Banking and PSD2 will be the leading buzzwords on your conference Buzzword BINGO, you can count on that.  

I have BIN…  See you at Sibos! (and check ACI out at booth F59)