The US government, at the request of banks and credit unions, should regulate API access to a person’s financial data. Yes, the financial services community should be forced to comply with an open banking standard. And the banks should demand it. They should lead the charge. When they understand why, they absolutely will lead the charge.
In the United Kingdom this is exactly what has happened. By law, banks are required to share data and provide easy API access to everyone’s data and payment transaction capabilities. Check this out to learn more about the open banking standard. Regulation, baby. Not really a theme of our government right now but needed nonetheless. The banks need to be forced to do this. Mandated. And really, it’s not the big banks that matter. In the US there are thousands of banks and credit unions. All of them, regardless of what their IT environment looks like, will need to build APIs and enable their organizations.
But wait! They don’t own the software, they license it. So whoever owns the software will have to build and provide APIs to facilitate free access to someone’s personal data. So who are the vendors? Do they like to make their data available? Do they have APIs today already in place? Do they charge for these APIs? I am under so many three-way NDAs that I can’t mention names but I can mention the category, core banking processors. They do have APIs today and yes they charge for them.
These big vendors have their own products and they’d rather not open up their APIs because it makes it easier for little snotty-nosed startups to gain traction. These big companies think it’s not in their interest. But obviously it can be done. Here at Malauzai we have over 40 interfaces to various core banking systems and a few hundred interfaces overall when you add in payment vendors, image vendors, etc. At Digital Insight in the old days we had well over a hundred core interfaces, many of which have gone away. It can be done, carefully and expensively.
Community banks, on the other hand, actually like APIs because it allows for really good point-solution providers to emerge. It’s the fintech software community that avoids APIs, or at least part of that community. It is counter to their business strategy or so they think. There are exceptions, like Profitstar, for example. This is an enlightened core banking processor setting up a division that can run free of conflict, focused on the technology that surrounds a core and yes, needs to interface to it. They get it over at Profitstar but alas, they are an anomaly.
As a small vendor, it’s inherent that we’re flexible and primed for all types of integration, so our APIs are already in place. We don’t charge for them. This is the case with many smaller Fintech companies, they are supportive of this change and are ready for it. Banks should demand the regulation of an open banking API standard. Vendors will be forced to provide APIs. Force the change. Bankers unite! Force the government to legislate, regulate whatever and make us all provide open API’s. If we wait for the industry to act, it simply will not happen. The big software companies have too deep of a lock for this situation to unwind quickly. It will eventually unwind, but there is a strong case to be made for accelerating this rate of change. Can’t wait for the day when APIs are easy to access and available to all, for free. In the end, there won’t be a bottleneck.