Future Strategy of Banks and FinTechs

API backed collaboration will become an expected way of doing business

Banks and FinTechs have struggled for years to find common ground. Initially, banks were skeptical of FinTechs, but have since come to appreciate their entrepreneurial approach to financial services, and also their ability to offer simple, easy-to-use, convenient, and cost-effective offerings to customers in areas most relevant to them. FinTechs however, lack scale, access to a larger customer base, and expertise in handling regulations, areas in which banks have expertise. These complementary strengths are leading to a realization that banks and FinTechs both need to have their future strategy based on collaborating with one another.

Benefits of Implementing APIs

The primary benefit of implementing APIs would be Enhanced Customer Experience

As banks and FinTechs link up via APIs, the banking industry will witness multiple benefits. Increased collaboration with FinTechs and the developer community will help banks in coming up with innovative products and services. APIs will also help banks in enhancing their operational efficiency, thereby increasing their agility and time to market. Quick and innovative offerings are expected to significantly boost customer experience as well. The overarching benefits of APIs across the banking value chain will provide a consistent, convenient, and frictionless end-user experience.

Concerns for API Adoption

Connected systems pose challenges to data integrity

While APIs offer plenty of benefits, they also present certain challenges. By design, APIs are intended to make bank information systems more accessible to third parties, so it follows that poorly constructed APIs run the risk of making internal systems more vulnerable to cyber-attacks. Customer privacy and data security challenges are serious concerns to both banks and FinTechs. Both of them will have to ensure they are fully up to date on the full range of API-related security best practices.