Data sharing mechanisms and standards crucial to open banking

The market’s ability to utilise APIs to allow data to flow systematically will be crucial to the success of global open banking initiatives, a panel told the Money 2020 audience today.

“There’s the data sharing piece of this, and the harmonisation and interoperability,” said Ryan Masters, executive director of strategic relationships, North America, SWIFT. “We’re never going to get to true, meaningful open banking until we apply data sharing mechanisms and standards. It’s going to be very challenging to achieve that and we see a lot of regulation at different stages around the world to support it.”

According to recent analysis by the Massachusetts Institute of Technology, firms who adopt APIs are more likely to have a higher market value than firms who do not use them: the researchers estimate that firms using APIs have 19.1 percent higher market value than non-adopters within the first year and 20.1 percent in subsequent years.

While supportive of APIs, IBM suggests there are organisational hurdles to adoption, including the outlook that embracing the infrastructure is purely an IT department concern, and a misinterpretation that businesses will charge for APIs.

For Don Cardinal, managing director of Financial Data Exchange (FDX) the surge in API adoption has made massive systematic changes both to the industry and its prospects.

“There’s over 13,000 banks and brokerages in the US,” he said. “That means in the old paradigm you would have to write a custom script unique to each of them and maintain it every time there’s a change. You would need an army of developers to do that. That would be a huge barrier to entry to two people in a garage with a great idea.

However, an API that can be used with a variety of market participants would make things much easier for the industry as a whole, he said.

“Imagine then a world with a common API – whether it’s Wells Fargo or Citi or Chase, or BoA – you just change the API and you just change the URL at the address that you hit and it’s done. Field one might be balance, field two might be date, and it’s infinitely scalable.”

Wells Fargo has a multitude of API use cases across retail, treasury management, wholesale banking, mortgage, brokerage, FX, and payments. The bank offers software development kits and sandboxes and other offerings.

“We saw APIs as a major opportunity for us,” said Imran Haider, executive vice president of open APIs at the bank.

Haider also pointed out that the open banking ecosystem in the US is developing swiftly, even if regions taking a more formalised approach are currently in the spotlight.

“We’re running millions of API calls a day through the channel, so this isn’t a science experiment. It’s always interesting when you read articles about open banking the focus is on Europe and Australia, and it’s about what’s coming in those markets, but in the US we’ve been in the business for three years and there are other providers who have been on that same timeline. We’ve learned some great lessons and developed great use cases.”

Related reading