May 15, 2018
Removing integration problems, enabling best-of-breed approach to building products and services, turning competitors into partners, improving the customer experience, making customized solutions possible… APIs will allow businesses to leverage technology with greater velocity in the future, avoiding stumbling blocks of the past and allowing them to seize opportunities for growth.
Traditionally, banks have built, owned and controlled the channels and applications through which customers access their services – be a retail customer checking their balance online or undertaking a mobile transfer, or a corporation initiating a batch of cross-border payments. With open APIs, third-party developers can gain access to banks’ systems and build their own channels and interaction screens for customers to use.
As a result of banks actively opening their APIs to third-party providers, customers are able to see and manage their banking transactions and accounts through portals that the banks haven’t set up and can’t directly control. More often than not, those channels are of a greater preference and use to customers than traditional channels. For comparison, while Chase’s banking app has 10+ million installs in Google Play, Facebook Messenger surpasses 1+ billion. Even adding up JP Morgan app doesn’t make the competition any closer – the app has just 100K+ installs in Google Play. The average US consumer, for example, are spending five hours a day on mobile devices, and 50% of that time is spent in social, messaging, media, and entertainment applications.
For banks, open APIs became a way to get closer to their customers on the one hand, and on the other – enable talented entrepreneurs to build compelling solutions benefiting the end-user without necessarily cutting out banks completely – an array of PFM apps are build on of institutional APIs with the only difference in the visual experience and features supported.
By now, it’s clear that banks must actively embrace the move to open APIs in order to secure their role and position in the new ecosystem of financial services and payments. Achieving this will require banks to develop a clear vision of their future, and reinvent themselves as technology businesses to turn that vision into reality. Some of the largest commercial banks in the US are in one way or another offering sets of APIs with the most vivid categories being informational and payments APIs.
Account information APIs are the most commonly met types of APIs opened by financial institutions, and, incidentally, often the most useless ones.
Wells Fargo offers the following informational APIs: Account Balance, Account Aggregation, Image Retrieval. BofA’s equivalent is the Balance Inquiries API in its variations, enabling access to balances in real-time from mobile devices or Treasury Management Systems.
Most largest banks offer sets of APIs that cover transaction history. While this type is still an informational one, transactional data is far more useful for PFM platforms looking to provide useful analytics to the user on personal spendings. The same can’t be said about branch location APIs.
Bank of America’s Transaction Inquiries is an example of an informational API that allows to access transaction history and retrieve details. Wells Fargo also covers this type with its Transaction Detail API, allowing access to transaction details and summaries for any of third parties’ Wells Fargo wholesale accounts.
Bank (products) information
Capital One’s Credit Offers API is a good example of APIs focusing on delivering relevant solutions based on everything the institution has to offer. This API allows to:
Retrieve product listings and details
Check pre-qualifications – submit customer information to determine which credit cards they would be qualified for if they were to apply
Pre-fill applicant details
Wells Fargo has a little more extensive list, with some APIs being particularly debatable in their usefulness. The banks’ Data Services APIs includes the following features:
Image Retrieval, allowing to search for and view images of paid, deposited, and returned checks and deposit slips
Account Aggregation, allowing to instantly access data for checking, savings, credit, loan and investment accounts
Wells Fargo Locations
The same set of APIs has also features from the account information group:
Capital One has a rich developer portal with a few slightly-better-than-informational APIs. The first one is the Bank Account Starter API, which provides the ability to open a new 360 Savings Account, 360 Money Market Account, or 360 Certificate of Deposit (CD). Customers can apply for an individual account or a joint account (up to two applicants), with the third party having full control over how the application is presented.
This set of APIs allows to:
Retrieve account products and details – get a full list of all supported deposit products, their product IDs, and details for specific accounts
Create new account application – submits an end-user’s application for a new 360 Savings Account, 360 Money Market Account, or 360 CD. This endpoint also provides the ability to fund the account instantly using ACH
Retrieve/answer out of wallet questions – provides secondary validation for users whose identity needs additional verification using Capital One’s out-of-wallet capabilities
Retrieve account application details – retrieves detailed information about an application
Citibank also has a similar set called ‘Authorize’ – the banks’ implementation of the OAuth 2.0 framework.
Capital One Rewards is an example of this category, including such features as:
Citibank has a similar one, called Pay With Points, allowing Citi customers to use their Citi Points to pay for all or part of a transaction in apps that integrate the API.
Bank of America offers Payment Initiation APIs, allowing to send payment instructions in real-time from mobile devices or ERP systems. Other features include:
Returns a payment intent ID that must be included by EMEA TPP with payment origination instructions
Payment Initiations allows for the origination of single payment instruction through CashPro Global Payments. Upon delivery, payment will enter Global Payments workflow allowing for approvals, repair, and release
Wells Fargo has a similar set of Payments APIs, but with a bit more extensive list of features:
Foreign Exchange, allowing to connect to Wells Fargo’s foreign exchange platform to request quotes, get rate details, book contracts, and request rate sheets
Push to Card, allowing to send immediate payments to US consumer debit cards
ACH Payments, integrating ACH payments straight into an app, website or business flow.
ACH File and Batch Status, allowing to check the status of ACH files and batches originated through Wells Fargo channels
Account Validation Services
Wire Payment and Status
With banks, two things are similar across the board – the types of APIs and the fragmentation. Most of the examples above represent a similar API strategy among banks – to release individual APIs for every elements of online/mobile banking – there is usually a separate API for transactional data, a separate one for balance information, a separate one for bank products information (that’s in case it’s not broken down into physical bank information and products/services details).
The FinTech community, on the other hand, offers a different approach to building financial APIs. Let’s look at two examples that are radically different from where banks are today: Xero and Stripe.
Xero is a fascinating example of how one API can integrate a whole business function. The company offers six sets of APIs – Accounting, Payroll, Assets, Files, Practice Manager, and Xero HQ – each of which has everything that a business needs in associated business function.
Let’s take the Accounting API as an example.
A single accounting API includes an extensive list of groups of functions, such as accounts, bank statements, bank transactions, bank themes, bank transfers, currencies, employees, expense claims, invoices, invoice reminders, items, journals… and this is not even the half of them.
Each one includes a set of functions. Accounts, for example, allows to:
Create individual accounts in a Xero organization
Retrieve the full chart of accounts
Attach files to an account
Archive an account
Update details on an account (except bank accounts)
Delete an account
A single API allows businesses to integrate a vital for the business function in a comprehensive way, without the need to add items in form of separate APIs.
Stripe brought an even more impressive approach and development to the APIs market: two brothers turned seven lines of code into a multi-billion-dollar startup. With Stripe, all a startup had to do was add seven lines of code to its site to handle payments: What once took weeks was now a cut-and-paste job. Silicon Valley coders spread word of this elegant new architecture, Ashlee Vance wrote for Bloomberg.
Stripe API is a beautiful product, no less.
Seven lines of code cover an impressive array of functions – all a small business needs to get up and running – which explains the wild success Stripe had in its relatively short lifetime.
JP Morgan Chase, Bank of America, Wells Fargo, Citibank, Capital One, BNY Mellon, BNP Paribas, and other US institutions are offering developer portals with documentation on an array of APIs. The hallmark of institutional APIs is that there are separate APIs for separate functions – for information retrieval, for payments initiation, etc. Informational APIs are the most commonly available APIs among banks, with less actionable enthusiasm around transactional APIs, and even less activity in offering anything more comprehensive.
Meanwhile, successful technology startups took a different approach altogether: instead of granulating their services to be delivered through separate sets of APIs, new architectures are built on a single API, performing all functions a business needs either in a functional department, or to run altogether.