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Three Key Benefits of the API Economy for Financial Services

By Jennifer Peve, Managing Director of Business Development and Fintech Strategy, DTCC | May 8, 2019

Three Key Benefits of the API Economy for Financial Services
Jennifer Peve, Managing Director of Business Development and Fintech Strategy, DTCC

In today’s competitive environment, firms are seeking to increase their growth opportunities, improve their client experience, reduce costs and enhance operational efficiency.

Institutions across financial services are embracing application programming interfaces (APIs) to meet these challenges, and to improve the flow of data and information across operations. APIs open communication channels between programs and, in doing so, enable digital transformation without a full overhaul of legacy infrastructure.

As fintech companies continue to develop modern technology solutions, APIs allow organizations to seamlessly integrate these updates within existing operations. In today’s world, where there is an expectation that the speed of innovation no longer sacrifices customer satisfaction or experience, it’s important for traditional institutions to be able to keep pace.

In the early days of API adoption, companies would often develop siloed interfaces for internal use. However, firms quickly learned that this fragmented approach was inefficient and introduced risk through redundant code bases. Now, as open ecosystems take hold and enable communication and data sharing between applications and services, APIs facilitate the smooth implementation of product development throughout the industry. This is one of the key benefits we’re seeing from APIs today, in addition to increased efficiency and agility.

Enabling Innovation: With APIs, developers can leverage technology developments already in the market as building blocks for further innovation. This eliminates the need to ‘reinvent the wheel’ by democratizing access to existing technology. For example, using APIs to connect microservices to an underlying platform enables new services to sit on top of and leverage an existing data set without it being built directly into the service itself.

Increasing Efficiency: The ecosystem of reference architectures helps providers deliver new solutions to the market much faster. It is also more cost-effective, saving both time and money on research and development, while allowing institutions to become more nimble and modernize their technology. We’re already seeing API-based initiatives enable open banking and streamline the movement of money, particularly in payments and banking.

Minimizing Disruption: While ‘disruption’ is often a goal for fintech providers and new market entrants, constant changes to technology and processes can be problematic for clients. Leveraging an API strategy minimizes the operational impact of these changes and insulates clients from disruption.

As API adoption fuels collaboration and new benefits, the value of new tech developments will be extended. And as the ecosystem expands, businesses will need to work together to establish interface standards to reduce risk. Interoperability will be key, so setting guidelines around security and data sharing will be critical to ensure API implementations live up to their full potential.

At DTCC, we’re focused on delivering upon a vision where we launch an API ecosystem, such that we can improve and streamline client access to their data, create distribution channels for new products and services, and enhance the overall client experience. This includes enabling our organization to design and control each API through consistent management policies while minimizing the amount of code and, ultimately, driving more seamless adoption. We are excited about the potential of APIs, for DTCC and for our clients.

APIs broaden the possibilities for innovation and improve client experience in financial services and beyond. With a deep understanding of client needs and challenges, the industry can set the right guidelines for the technology to manage risk and customize services.