Don’t believe the hype about application programming interfaces

Register now

It’s important to understand that APIs are a distraction from the real challenges facing card issuers. The significant shift comes from the rise of the cloud and the resulting user experience that this enables.

APIs are not new and they’ve been around since the age of desktops. APIs facilitate the ability for two pieces of software to talk to each other. While that hasn’t changed, how they talk to each other has changed. And, APIs that shuttle data back and forth are only as good as the applications that utilize the data.

Since 1997, when “cloud computing” was first coined, servers have come a long way in their capabilities. As a Recode article puts it, “Everything from smart digital assistants to autonomous cars to virtual reality is being enabled and enhanced with the addition of new types of computing models and new types of computing accelerators to today’s servers and cloud-based infrastructure.”

So what should issuers focus on in order to create the best customer experience by leveraging the best possible technology?
Cloud technology has made it possible to leverage APIs so that two pieces of software talk to each other and stay updated in real time, which dramatically improves the user experience.

That's led to collaborations between banks and financial technology companies that provide payments, billing and other services. These partnerships provide a breakthrough, allowing issuers to extend services and deliver a seamless user experience.

So what are the concerns about adopting the cloud, given the advantages?

Security. With all of the recent headlines about banking data breaches, the nervousness about cloud technology is understandable. Financial services are the most-attacked industry and were breached 65% more than the average industry last year.

Compliance. New technologies that support open access services may expose an issuers to money laundering risk. This places banks at risk of breaching the Bank Secrecy Act and Anti-Money Laundering Act and losing millions of dollars in penalties.

Lack of resources. According to the RightScale 2017 State of the Cloud Report, “Lack of resources/expertise, the No. 1 cloud challenge in 2016, was less of a challenge in 2017 with only 25 percent citing it as a major concern, down from 32 percent in 2016.” But for many, the high-cost of cloud migration is prohibitive.

While all of these concerns are valid and important to evaluate when researching a cloud adoption strategy, it’s necessary to acknowledge that open APIs and the cloud are here to stay. In fact, Gartner predicts the worldwide public cloud services market will grow 18% in 2017 to $246.8B, up from $209.2B in 2016.

There are many advantages to banking partnerships that cloud adoption facilitates. While many experts are advocating for APIs, it is more important to focus on their cloud strategy in order for their partnerships to be effective.

And there are ways to optimize partnerships. By making all of your customer’s needs live in one place, for example, you can centralize online banking, payments, bill pay, invoicing and payroll all in the same browser, which commends a lot of ease of use.

Customers can log in from anywhere in the world, from any device, and your experience will look the same and feel consistent. This is another great example of why it’s not about the API, it’s about cloud based software that will lead to a different customer-focused strategy.

Ask any developer, and they’ll tell you that few apps are of high quality and get broad distribution and exposure. So make sure that when you’re researching partnerships, you’re not only partnering with the market leader, but that you and your partner are figuring out how to work together to create the best user experience.

For reprint and licensing requests for this article, click here.
Fintech Cloud computing APIs Bill pay Payroll payments Retailers ISO and agent