FS industry is going through a big disruption cycle, where they are trying to redefine the business model, create and sell differentiated product and services, engage customer and community at large to provide value added services, innovate and optimize business to stay ahead of the competition.

Biggest threats for FS Industry are coming from innovators like Google/Apple (digital wallet & mobile CX platform) and traditional industries like Telecom (m-Pesa) & Retail (Ali-Pay etc), cryptocurrency (BitCoin, Ripple etc) and Digital society (P2P, Crowdsourced lending etc.) at large.

This requires a hard and fresh look at the way FS industry runs IT and operations. An Open banking approach is needed to fuel innovation, increase agility, reduce business risk and improve customer satisfaction.

FS organizations must go beyond their boundaries and work with customers, partners, Communities and even competitors to create thriving ecosystem. following are the key area of focus to drive Open API strategy:-

1.Digital business models enabled by Open API -

New FS business models are going beyond the core FS services. FS organizations are starting to provide value added services - like loyalty and rewards, service brokerage (for lending, travel, insurance etc), Personal Advisory services (Mobile wallet). Most of the e-Payment and e-Commerce vendors are providing APIs to enable innovative business models.

For example WePay's monthly crowdfunding payment processing is approximately $1.5 million and grown by 35% per month since it got its first crowdfunding API partner. Braintree, a merchant acquiring payment platform based on APIs, and it processes more than $10 billion per year.

To succeed in Open API economy, Enterprise architects need to play a bigger role and design Architecture blueprint to enable a digital ecosystem beyond traditional Banking by enabling IT systems to interact with other banks and investment services firms, retail and corporate customers, counterparties, exchanges, clearinghouses, IT software and services providers, telecom and networking providers, data providers, industry utilities, regulators, and other entities that collectively deliver value.

2. Differentiated product and value added service delivered using API ecosystem -

 Rolling out differentiated products & value added service across retail, commercial, investment banking segments require strong Open API ecosystem.

• Core Products - Banks have started to expose APIs for various core processes like account opening/onboarding, information (consolidated account, reconciliation and transaction information), foreign exchange (quotes and execution) and others.

For example Standard Treasury provides white-label APIs (to receive information) for commercial banking. Payscape provides a payment gateway API, mobile payments API, online registration API and online invoicing API to small and midsize businesses.

• Value added service - Banks have also started to provide value added services using Open API platforms to increase stickiness and loyalty.

For example CapitalOne opened up their platform for Digital Deal & rewards using your Apps. They have given extra emphasis to secure communication, self-identification and grant permission to 3rd party (OAUTH). Commonwealth Bank of Australia launched an Open API platform named "Pi". They also developed an interactive multifunctional merchant platform named "Albert". It could be used to build apps for loyalty and redemption, split bills and pay, inventory management etc.

• API Market places are emerging across Vendor, Partner and Banking ecosystems. It is essentially a developer portal to discover, access, test, sign up to Web APIs for new Web or mobile applications. A effective revenue model is emerging by hosting the developers portal functionality on behalf of the API provider.Vendors such as Rackspace and AppDirect have built service catalogues that include APIs and developer tools. GitHub also provides a service catalogue for APIs. MuleSoft (ProgrammableWeb) traditionally listed thousands of Web APIs. Some offerings, such as Mashape, are born only to be API marketplaces.
• App store - Banking apps as of date has been mainly replicating online banking application functionality for mobile devices. The next phase of banking app will drive location based, real time personalize digital banking services using all relevant sensors inbuilt into a mobile device. There are mainly 4 types of App store emerging:-

- Public App store -like GoolePlay, iTune, Windows Store. Banks and nonbanks use public stores to deploy mobile apps they have built for banking customers

- Vendor app stores — Cloud-based or on-premises stores that are sponsored and branded by a banking technology vendor to enable licensed customers to discover and download banking. Two distinct models exist such as communal (vendor/partner/bank) and crowdsourced (vendor/partner/bank/third party). DNA App Store is both a communal & crowdsourced app store, which allows banks to collaborate with community and develop apps.

- Enterprise app stores for employees -  It provides mainly 3 apps types of apps - Banking-specific (relationship managers, loan officers, branch sales employees etc), Business Specific (Open accounts or process personal loan when visiting a customer), 3rd Party consumer Apps.

- Banking app stores for customers — Banking app stores are usually provided by a bank that has deployed public Web APIs and software development kits (SDKs) for third-party developers to custom-build apps. Examples of banking app stores include Crédit Agricole (CA Store), Deutsche Bank (Autobahn App Market) and Commonwealth Bank of Australia (App Catalogue).

3. Customer & community engagement using Open API -

In an era of hyper communication and social networking. Banks needs to make sure they engage with customer community at large in effective way. Use them as part of the development & Innovation, decision making and feedback process. Open API platforms Layer-7, WSO2, Mashery, Mulesoft etc are enabling engagement of customer and community at large to engage and co-innovate.

• Citizen development - Budget shortage and a lack of resources often impedes a rapid IT response. is an effective way to engage outside the IT organization for application development. Banks can also develop end-user to unlock business knowledge with few end user and enable faster requirement gathering and project execution.
• Internal & external Hackathons - Use external hackathons to drive location or context-specific solutions and ideas across sales, marketing and customer services. Internal hackathons to fuel innovation at workplace - thinking differently and more deeply about digitally enabled business opportunities.  Hackathons are becoming forum for employee, product vendors, IT service providers, Bank IT, community developers and other 3rd party service providers to come, engage and innovate.
• Crowdsourcing for Open Banking - Crédit Agricole has used crowdsourcing as a cornerstone of its CA Store initiative. These crowdsourcing activities generate ideas that are increasingly selected through voting by participants — with the final selection made and developed by the organization's employees.

4. Continuous Innovation, Optimization & Agility driven by Open API -

While some institutions point to agile as a means to achieve faster reaction times to the customer and business, to be truly transformational, agile software development needs to be combined with an architecture and governance model that can accommodate dynamic change. There are efforts like Open Banking project or Open source Banking platforms getting built to drive innovation & Agility.

• Open Bank Project - The Open Bank Project is an open-source API management software and app store created specifically for the banking industry that provides data APIs (via GitHub), governance, intermediation, metadata, registry and repository, and security. It provides and manages REST APIs using Open Authorization (OAuth) so that a bank's customers do not disclose their credentials to any third party. It also provides a form of canonical message/data model that sits in between applications and the bank's internal IT systems. It abstracts the complexities of different core banking systems so that developers and vendors can securely connect their applications to multiple banks. Its revenue model includes a commercial licensing option or revenue sharing (by API usage) model for banks, through which the Open Bank Project can manage APIs, leverage its developer community, execute hackathons and build new apps for banking clients.
• Open-Source Banking platform - while there is a large entry barrier like lack of structured governance, support, standards and security vulnerabilities, open source banking solutions are still being developed- for example Cyclos (online and mobile banking), MyBanco (microfinance) and Mifos (core banking).

5. API governance and Security -

• While API economy is proliferating, it is becoming important to govern the API ecosystem. Setting and enforcing policies for their definition/design/usage by applications. With adoption of SOA and growing importance of mobile and IoT, API management is essential in a digital business environment.
• Security is another aspect which needs to be taken care to avoid business risk. OAuth has evolved to support more use cases in social networking interactions and document access control. OAuth will likely be relevant as a method of supporting authorization for consumer-, commercial- (in the case of mobile apps) and partner-facing banking apps. its use along with OpenID Connect should help ensure more consistent two factor authentication implementations in near future.

Open API enabled development is the future. The quicker Banks understand that, the better it is for them to Standardize, Innovate, disrupt & expand business in this progressive digital economy!!!

Ref: Gartner Hype cycle open banking API-app store 2014 &  Bank Operations Innovation 2013