Turning banks into app stores has primarily been a vision of some European startups, but a California company is hoping to bring it to reality in the United States.
Paymency in San Diego wants to offer an API-based "banking-as-a-platform" service to U.S. banks, founder Gary Lewis Evans said.
Evans, who more than a decade ago co-founded what was then called Bank of Internet USA, predicts that application program interfaces inevitably will power banking. APIs – which make it easier for outside programmers to build software apps that deliver services to customers – will have the same revolutionary impact as credit cards and internet banking once did, he said.
"We are going to be an API-driven platform for finance and banking the way Amazon is a platform for retail," Lewis said. "Banks will have the ability to interface easily with products and services and use it as a way to create a virtual bank and get out of the legacy branch structure."
So, that means banks would be able to tap into Paymency’s version of an app store to offer a range of consumer products, such a personal financial management, budgeting or mobile payments, as well as a host of more sophisticated services including insurance, investing and P-to-P lending, he said. Products from any number of fintech companies and other partners would be available in the store.
Moreover, Paymency may pursue a bank charter so digital bank startups or nonbank entities such as Walmart could plug in and offer full-scale banking services. Paymency uses the Microsoft Azure cloud computing platform as its base technology.
But first, Lewis said, the company is going to roll out its mobile payments product, GroovyPay, a text-based mobile payments network, which resembles the M-Pesa mobile payments system in Kenya.
"I describe it as something very similar to when Amazon first launched as a bookseller, and then they expanded their platform at a later date," he said. "So we’re going to launch with mobile payments and build our base that way before expanding."
Lewis, who has been in the banking industry since 1971, has a history of digital innovation. While serving as president of La Jolla Bank, he spearheaded the California institution’s early foray into internet banking in 1995, one of the first bank’s in the country to do so. La Jolla failed in 2010.
In 1996 Lewis left La Jolla Bank to start what would eventually become Bank of Internet USA and then later BofI Federal Bank.
"It was hard to even find a server at that time," he said. "We started out in the [University of California-Santa Barbara] computer center."
Lewis served as president and chief executive of BofI for several years, before leaving the company in 2010 to pursue his next project, which became Paymency.
Lewis is still in the fundraising phase but expects a "soft launch" of Paymency with GroovyPay in roughly six months. He estimated it will take about three years before Paymency’s full app-store-like platform will be formally launched.
An API-based model would allow banks a greater deal of flexibility in determining which products and services they could offer, said Tom Frale, director of businesses development at RLR Management Consulting, which advises banks on technology and other matters.
"From a conceptual perspective the idea of doing something like this is very appealing," he said.
Frale added that one major hurdle would be getting banks’ core vendors on board.
First, banks would need core systems that could facilitate API-based banking, and the core vendors would also have to be willing to allow these outside services to integrate with their systems.
Traditionally, most core vendors want banks to buy all, or at least most, of their ancillary products from them in addition to the core. But Frale said that mindset is changing, and core vendors are becoming more flexible in this regard as more of their customers embrace API-powered banking.
"This is exactly where the evolution of the marketplace needs to go," Frale said.
And banks themselves are also more open to the idea of partnering with outside firms to offer products or services, said Enrico Camerinelli, a senior analyst with Aite Group.
"You’re seeing this with all the fintech partnerships happening" with banks, he said. "Things have changed and the market is much more dynamic and fluid; banks have realized they don’t have to act as monoliths and offer solutions solely created by the bank. It’s about finding new ways for banks to be more proactive in serving the needs of consumers."
An API banking-as-a-platform service is the natural path for the industry and is just gathering steam now because the technology to facilitate it is so new, Lewis said.
"Twenty years ago when we started Bank of Internet, you couldn’t do this," he said. "But technology is advancing so rapidly that it’s now a reality."