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What your

Banker Should

Know about APIs

September 2020BBVA and BBVA Compass are trade names of BBVA USA, a member of the BBVA Group. BBVA USA, Member FDIC. All accounts are subject to approval. All trademarks, service marks

and trade names referenced in this material are the property of their respective owners.

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The content provided is for informational purposes only.

Neither BBVA, nor any of its affiliates, is providing legal, tax,

or investment advice. You should consult your legal, tax, or

financial advisor about your personal situation. Opinions

expressed are those of the author(s) and do not necessarily

represent the opinions of BBVA or any of its affiliates. All

accounts and credit are subject to approval, including credit

approval. BBVA and BBVA Compass are trade names of

BBVA USA, a member of the BBVA Group. BBVA USA is a

Member FDIC. All trademarks, service marks and trade

names referenced in this material are the property of their

respective owners.

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What is an API?

Confused

Lets clarify some things!

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What is an API?

An application program interface (API) is code that allows two software programs to

communicate with each other. An API defines the correct way for a developer to

request services from an operating system (OS) or other application and expose data

within different contexts and across multiple channels.

https://searchapparchitecture.techtarget.com/definition/application-program-interface-API

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Types of APIs

Source: IBM Corporation

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What is an Open API?

An open API is nothing but an API that has been made public, so that third-party applications can access back-office services/applications without any middle tier. It is a way of simplifying the integration between the external applications and the core functionalities of a business. APIs have been around for a long time, but were never before made public and accessible to the outside world. Therefore, this is a complete shift from the old concepts and creating a new world of open APIs.

https://www.techopedia.com/2/31968/technology-trends/open-source/open-api-the-future-of-application-programming-interfaces

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Examples of Open APIs

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Examples of Open APIs

The Google Maps API allow for

the embedding of Google Maps

onto web pages of outside

developers, using a simple

JavaScript interface or a Flash

interface. It is designed to work

on both mobile devices as well

as traditional desktop browser

applications. The API includes

language localization for over

50 languages, region

localization and geocoding, and

has mechanisms for enterprise

developers who want to utilize

the Google Maps API within an

intranet. The API HTTP

services can be accessed over

a secure (HTTPS) connection

by Google Maps API Premier

customers.

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Examples of Open APIs

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Examples of Open APIs

Affiliate partners are

companies or individuals

who have access to our

Consumer API. They use it

to connect their products to

OpenTable's restaurant

content and to give users

the ability to discover and

book tables through those

products.

Once the API is plugged into

your app, widget, or site,

and you're logging more

than 100 seated

reservations every month,

you'll make money with

each converted booking.

The more traffic you have

and send to OpenTable, the

more revenue you’ll

generate.

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https://en.wikipedia.org/wiki/Open_API

Examples of Open APIs

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Why Should Your Banker Be Concerned?

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Why Should Your Banker Be Concerned?

= OPEN BANKING

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What is Open Banking?

Open banking is a system that provides a user with a network of financial institutions’ data through the use

of application programming interfaces (APIs). The Open Banking Standard defines how financial data should be

created, shared, and accessed. By relying on networks instead of centralization, open banking helps financial

services customers to securely share their financial data with other financial institutions. Benefits include more

easily transferring funds and comparing product offerings to create a banking experience that best meets each

user’s needs in the most cost effective way. Open banking is also known as "open bank data."

https://www.investopedia.com/terms/o/open-banking.asp

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Open banking is a term that is associated with a broad set of initiatives that align to one of these three principles:

Banking customers are empowered as the owners of their financial data.

Customer data has been traditionally locked in banks’ IT systems, but this practice is changing. Regulations,

such as Payment Services Directive (PSD2), are forcing banks to “open up,” enabling customers to easily share

data with third parties.

Banking products are transparent and easy to compare.

You can understand and compare products only if they are described in a consistent way and the information is

easy to access. The first phase of the UK Open Banking initiative is an example of initiatives that are targeting

this space.

Multiple parties work together to create new value chains to produce better products and services.

A traditional retail bank has its own distribution channels (such as branches, contact centers, and digital

channels). It also creates its own products and has its own back-office operations. The emergence of financial

technology (fintech) and the push of regulators for more competition are disaggregating and open this closed

value chain. In a world of open banking, participants can specialize in one or more sub-steps of the end-to-end

process. They can focus on areas that have a clear competitive advantage and leverage the scale and efficiency

that partnerships with other players enable.

https://www.ibm.com/blogs/insights-on-business/banking/open-banking-apis-are-open-for-business/

What is Open Banking?

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Open Banking – The Early Days

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celent.com

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Examples of Open Banking

Versus

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Examples of Open Banking

Working

With

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Open Banking Is Coming

“According to the World Retail Banking Report 2017, published by Capgemini in

conjunction with Efma, fintech firms are more likely than traditional banks to provide

consumers with positive banking experiences. That said, more collaboration than ever is

taking place between banks and fintech firms, leveraging the benefits that each can bring

to the table to create customer-centric solutions. This collaboration has lead to the

emergence of Open Banking and APIs, using customer data and innovations to create

new revenue streams and more contextual services.”

“According to the World Retail Banking Report (WRBR), while a small minority (2.9%) of

consumers do all of their banking with non-traditional firms, more than a quarter (26.5%)

use both traditional banks and non-traditional firms. More than one-half (52.4%) maintain

relationships with three or more non-traditional firms, while only 7.4% have a relationship

with just one. In total, 29.4% of consumers globally use at least one non-traditional firm,

with many of these consumers being the most desirable to the traditional banking

community.”https://thefinancialbrand.com/65975/open-banking-api-fintech-partnerships/

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“The most successful banks will use open APIs to generate new customer insights and

revenue streams, while also improving customer experience,” said Vincent Bastid,

Secretary General, Efma. “Many banks currently use APIs internally to improve

information flow between legacy systems. In fact, we are already seeing early adopter

banks asserting their role in Open Banking by proactively making their systems and data

available to third parties and creating new revenue streams.”

https://thefinancialbrand.com/65975/open-banking-api-fintech-partnerships/

“Open banking presents opportunities for creating and distributing a wide variety of both financial and non-financial products and services – with the banking retaining the customer relationship – but greatly expanding the number and variety of services to improve the customer’s quality of life. In an open banking model, an unlimited number of partners could insert themselves into the relationship development process.”

Open Banking Is Coming

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2017

“Corporate customers expect to have access to instant banking facilities, enabling them to interact with the

bank directly from their enterprise resource planning (ERP) or legacy systems in a secure and seamless

manner without any time delay. The digital transformation of the world is creating a paradigm shift in way

that corporates do business. In today’s competitive business environment time is of the essence, which has

compelled banks to minimise turnaround time and ensure instantaneous payments. They are also

compelled to ensure that the facilities provided are benchmarked with global standards and help corporate

customers to digitally transform their businesses”.

https://www.theglobaltreasurer.com/2019/07/17/open-banking-the-great-enabler/

2019

“It’s clear than that the API connectivity layer and AI will be transformational forces within this space and will allow nimble corporates who understand and harness AI technology within the Open Banking ecosystem to emerge as true winners. It’s worth pointing out that this isn’t some kind of future pipedream either – we’re talking short-term here according to many in the sector. In fact, Desai says that real-value for corporate use cases is likely to start emerging in around 12 – 24 months’ time.”

https://www.theglobaltreasurer.com/2017/12/21/2017s-most-popular-api-banking-and-the-digital-transformation-of-business-

part-1/

Open Banking Is Coming

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PSD2 (second Payment Services Directive) is the European Union’s regulation that

mandates banks to open up access to accounts and customer data (e.g. payment details)

to third-parties. Of course, customers that want to use third-party apps to manage their

finance, need to give a permission to get access to their banking data.

The regulation is applicable in the European Union. There are a few players included in

PSD2, such as TPPs (Third Party Providers), PISPs (Payment Initiation Service

Providers), AISPs (Account Information Service Providers) and ASPSPs (Account

Servicing Payment Service Providers) - for instance, a customer’s bank.

All this means that PSD2 allows PISPs and AISPs to access customer account data and

initiate transactions without having the ASPSP prior commercial agreement. In result,

customers may no longer need to log in their banks’ websites or apps directly to conduct

some financial operations.

https://www.quora.com/What-is-PSD2

Open Banking Is Coming

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https://maveric-systems.com/blog/a-new-era-of-banking-customer-centric-open-banking/attachment/open-api

Examples of Open Banking

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Examples of Open Banking

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slideshare.net

Examples of Open Banking

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Examples of Open Banking

Case Study

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Case Study

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Case Study

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Modo tackles a perennial problem with payments: that the natural evolution of decades-

old payments solutions has left us with siloed, unconnected, disjointed, and proprietary

systems. Companies that want to offer their customers innovative new digital payments

services often waste valuable time and money trying to patch together individual

integrations.

Modo solves this problem by connecting companies offering new digital payments

experiences to payments systems worldwide through its payment data exchange, the

COIN® Digital Payments Hub. Companies have a single, secure point of connection to

Modo’s exchange, which allows them to send or receive any source of value to or from

any destination without having to worry about integrations or data system requirements.

This accelerates their time to market, scalability and gives them more partner flexibility.

https://modopayments.com/

Case Study

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https://www.xero.com/us/

A real-time view of your cash flow

Log in online anytime, anywhere on your Mac, PC, tablet or phone to get a real-

time view of your cash flow. It’s small business accounting software that’s

simple, smart, and occasionally magical.

Case Study

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Case Study

Azlo is a new business banking experience created by founders, for founders. With

Azlo, you won’t get hit with minimum balance charges or hidden fees. You won’t

spend time driving to a branch and waiting in line, or juggling multiple tools to view

your transactions and send invoices. Azlo’s mission is to drive economic

opportunity and financial inclusion by empowering a new generation of

entrepreneurs with the tools and knowledge to start, scale, and grow their

businesses.https://www.azlo.com/

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What your Banker Should Know About APIs

• Open APIs are enabling open banking

• Banks are embracing open banking to expand profitability

• Those banks that don’t embrace open banking will be at a

competitive disadvantage

• Corporate clients will begin to demand open banking

applications

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In Conclusion

“Open banking is here, and it is far from being a compliance exercise. What are you going

to do with it? The status quo is changing, opening greater opportunities to create better

product and services.

Open banking doesn’t apply only to banking. Regardless of the business you are in, the

way in which your customers pay, or obtain credit to receive your services, is part of their

experience with your products. Open banking opens them and your company to the

possibility to new types of interactions.

If you take an even wider perspective, the ‘open banking movement’ is tackling head on

some of the challenges that lie at the core of creating a new open market. How can

participants find other market players? How do you trust parties that you don’t know? How

can you exchange sensitive data in a way that is both secure and transparent?”

https://www.ibm.com/blogs/insights-on-business/banking/open-banking-apis-are-open-for-business/

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Questions?