TechnologyBanks, fintechs and corporates look for API standards

Banks, fintechs and corporates look for API standards

API usage grows but financial industry must sort out API ‘dialects’

As corporates look to digitise their processes and banks allow automated access to accounts and data, API integration remains a challenge.

The crux of the issue is that while APIs offer a common method of automatic communication, there can be slight differences in data fields that can lead to incompatibility. Hans Tesselaar, executive director of BIAN, a not-for-profit association of market participants, likens the differences to dialects.

“They’re all differently constructed. Different APIs can use different naming [conventions] or a different field size.”

BIAN itself is looking to address this problem by propagating several standardised APIs through a “coreless banking initiative” where banks, corporates and fintechs are developing universal standards for banking infrastructure.

“We try to base them as much as possible on the ISO 20022 standard because a lot of organisations are familiar with the naming conventions.”

Mike Walker, head of working capital finance at Finastra says the trend he is seeing is using a more standardised API format rather than more bespoke integration methods.

“[Standardised] APIs will ultimately reduce the cost of ownership and make corporates more flexible to change,” he says. “For banks, it will enable them to offer new products and services at a much greater speed.”

Small but growing

However, the financial sector’s API usage lags other industries. A report by Google found the number of API calls made by financial services firms grew by 125 percent in 2020 but still only made up five percent of total API traffic. The sector’s growth was also dwarfed by that of the healthcare industry, where API usage increased by more than 400 percent.

The coming year presents a window of opportunity to further digitise the finance function. As SWIFT is set to formally role out ISO20022 next November, Walker says corporates can leverage this change to digitise more of their function.

“The ISO 20022 is a trigger or catalyst for other upgrades that they may want to do in the system.

“It’s effectively a compliance change. Actually securing budget for that change because its compliance related is much more straight forward. They can actually use that as part of a wider transformation.”

Increasingly banks and treasury departments are using third parties to help integrate bank data into existing ERP/TMS solutions.

“If you use a third party you also take advantage of the knowledge they already have gained in similar projects,” says Tesslaar.

“You need to have someone in the ‘control room’ who will help. Sometimes it’s the vendor, sometimes it’s the bank. But usually, it’s a combination of both.”


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