A Tale of 3 Financial APIs: Venmo Closes, BBVA Opens, NPCI Builds Further

When TechCrunch reported that Venmo had abruptly killed its developer API access, I was quite surprised. But then I thought that API is not an easy business to manage; it takes a team to launch or open up APIs but it takes much more to maintain it day in and day out, month over month. It’s a thankless job; continuity of service requires a lot of effort that goes behind the service. If there’s even a single hitch or if the API has downtime, the customer fallout is heavy. It was later clarified by Venmo that existing developers would be able to continue using the services while the developer API has been shut for new developers.

But the question still remains. Why would Venmo shut down its API for (even) new developers. Was it just that its management and upkeep was too much to handle given other priorities. Maybe (thinking aloud) security vulnerability had a role to play? We know that they had struggled in the past with a couple of lapses that were exposed. It was observed that if a hacker gets access to your account, and then changes the account email/password, then there was no alert sent to the user. Password change or email change alerts were not enabled, and there was discussion around slow response from the team when notified about potential fraud. They faced a lot of flak for that. I am not sure but I fail to understand why would they do what they did with their API. The other reason could be a push for monetization under Paypal?

While this talks about one end of the spectrum which is trying to cut off access to developers, BBVA – a large bank and a bigwig in the financial services sector – is making impressive strides with its open API strategy. They are one of the few banks to reach this place so soon. We believe that BBVA is a leader in its FinTech open innovation strategy, and has one the most evolved thinking in working with startups. It has been at the forefront of innovation by successfully conducting hackathons and running startup competitions for its accelerator/incubator (Open Talent is in its eight year). But more than that they are one of the few banks who understand how to integrate with product startups once they have found them. Investing in FinTech startups or identifying is one thing but we have seen this in case of many banks that they are not ready (from compliance, tech and management perspective) to integrate products from startups into their systems. BBVA seems to be ahead of the pack. Earlier this year, BBVA Compass partnered with FutureAdvisor (acquired by BlackRock) to Offer Robo-Advisor Services to its Customers. Read more about why I like them so much here.

With FinTech innovation creating ripples worldwide, BBVA has been readying itself to brace them by opening up their APIs and partnering with startups and developers for innovative solutions. Their upcoming Open API platform not only provides the developer community with API tools but it also serves as an information hub for all tech enthusiasts by providing insights relating to the next wave of innovation in financial services. Though some call this as a step for complying with the PSD-II regulation which mandates banks to open up de-anonymized data for external firms, we need to take into cognizance that BBVA had started the initiative in 2013–14 while PSD-II was formally announced last year and is set to go into action only from 2018. Taking their strategy forward, last week, they announced that they had hired Shamir Kharkal, Co-founder of Simple (which was acquired by BBVA) for heading the newly created role of Head of Open APIs. The motive here was to build an open API platform that would let BBVA take advantage of technology by possibly opening up its core platform and services to external innovation.

In India, NPCI (National Payments Corporation of India) announced that it is implementing a unified payment interface UPI that would act as a single point of interface across multiple payment systems. This would make payment transfer transactions as easy as sending a text message over a mobile phone. The system (APIs) aims at removing the hassle of providing customer account numbers in implementing payment transfer transactions. The key here is to use a mobile phone number or an Aadhaar card or a virtual payment address instead of entering any bank account information. Another benefit with this solution would be the ability to use a mobile phone to not only pay someone (also called push transaction) but also allow collections (pull transactions). The other benefits of this system are its interoperability, biometric authentication and it being a mobile-first platform, etc. The interface is set to provide a strong incentive for new-age technology solution providers to come up with innovative services that previously could have been possible only for the bigger players. The interface – coupled with the government push for startups (at the time of writing this article, the news of having tax-free operations for startups in its first three years of operations had just been announced by the Finance Minister in his 2016–17 budget speech) – places India on a platform with the potential for the development of innovative solutions for India.

The three examples from three different geographies all point to one major aspect of the focus – should you or should you not open up your APIs? As a startup, as a bank or as an industry body, if you want external innovation on top of your platform by multiple developers and startups for powering their money transfer services, why would you do what Venmo has done? Big banks and regulatory bodies have also taken note of this important development and have taken steps in their own capacity to encourage and involve the developer community at large. We at LTP have been continuously tracking this space to provide you with regular updates on some of the leading analysis relating to APIs and their importance.


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