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For now, Rewards could be used as part of a financial planning and money management type service, where devs could create products that help users set goals, although in future, it is envisaged that the Rewards API could be used by retailers and service providers to let customers pay directly from their Rewards balance.
The Credit Offers API could be used, for example, by travel or training services that could integrate the API so that their end users purchasing a holiday or a training course could check to see if they could make the purchase through a pre-qualified credit card or loan from Capital One.
Anwar confirmed that developers will be able to create new business models, including allowing monetization, from their use of the Capital One open APIs. As more devs start building, the dev portal may include a showcase of approved applications and a marketplace of experienced developers who are available to work with other businesses who want to leverage the Capital One open APIs. “This is about the community,” said Anwar. “We absolutely want to build on their success. Down the track, we do have plans to promote their work, and you will start to see us share their success stories quite a bit.”
While developers can sign up and begin using the APIs immediately, applications being built using the APIs will need to be approved by Capital One in an app-store like process.
“We will have a stated SLA,” said Anwar, assuring developers that they will be kept in contact throughout the approval process. Anwar is also hoping through this approval process, they will receive feedback from developers about what other services and functionalities they want opened up via API, and what problems in application development they need to solve.
Are Banks Moving to Open Platforms?
To date, banks have been hesitant to release APIs publicly, although many industry-insiders recognize this is the trajectory ahead, yet few have the leadership team or strength of vision to pursue that goal boldly. A CA Technologies and Axway-sponsored study last year with 22 banking executives from around the world (conducted by myself and Mehdi Medjaoui) found that while the majority of banks recognize that an open banking platform is the endgame for the industry, most had not been able to build internal support for such an approach as yet.
The study found that, for now, the majority of banks were focused on building internal APIs, but with a view to potentially opening them up in future.
“This is about leadership,” said Anwar. “If you have a platform mindset, you take this approach. Yes, banks are regulated, but we are able to figure out what our legal requirements have to be, not in a way that is dissimilar to tech companies like Google and Facebook. It is about embracing the change, and that comes from strong leadership.”
In Australia last week, several banks spoke about their API strategies at APIdays Australia. Keynote speaker James Bligh from National Australia Bank said at his bank, “We do not have an API strategy, we have a customer strategy. And APIs are the best way to adapt and reach the customer.” However, he also mentioned that at present, the banks focus is on opening APIs to partners like financial software provider Xero, “to enable customer needs rather than opening a platform ecosystem”.
Other bank speakers including Tim Liddelow, Head of Enterprise Architecture, Digital at ANZ Bank and Uli Holtel, Senior IRT Specialist at Bankwest also spoke.
While both showed their bank’s expertise and keen understanding of both API best practices and the potential they offer to transform banking, speakers still fell short of being able to commit to any timetable for an open bank platform.
A similar trend is also observable across Europe and the UK, where pressure is coming from the regulators who are insisting that banks open up their payments infrastructure. While not signaling out APIs as the necessary technology to make that happen, many insiders feel that it is the best way to achieve the European Commission’s mandated goals of enabling third party providers to directly make payments from a bank customer’s account (where the customer has approved the payment).
The second Payment Services Directive (PSD2) entered into force at the start of the year, which means EU members now have two years to prepare and start enforcing national legislation that insists banks open up their payments infrastructure to third parties. The UK has already released an open banking API standard framework to describe how it wants to enforce the regulation, and the Open Bank Project has already started prototyping a set of open bank APIs modeled on the standards, with a similar set of APIs expected to be released for PSD2..
ABOVE: The UK’s Open Data Institute describes how an open banking standard will drive banking platforms, which mirrors the sort of platform Capital One is now creating in the U.S. (Illustration by Ian Dutnall with Adrian Philpott)
Meanwhile, individual baks are showing signs of innovation, but are not quite willing to move towards an open platform as yet. Fidor Bank in Germany has some open APIs. ING is building a new wave of dashboard products for business intelligence that are all API-enabled, but these are being prototyped and developed for in-house teams and in an alpha release by their innovation lab. They are not making APIs open publicly to share the data feeds that the bank is using for their prototype, for example. BBVA has a strong background in API strategy, having built and released the API management platform APIversity, and have been a leader in opening up transaction data via APIs for use in hackathon. But they, too, have nothing yet available on a more ongoing basis.
In the U.S., banks like Citi have worked with JustAPIs to release APIs for hackathons in a similar model to BBVA’s time-limited competition-only APIs. Last year, Silicon Valley Bank acqui-hired open bank API builders Standard Treasury in order to bring more API skills in-house.
But a move like Capital One’s is one of the first to truly open APIs and launch a fully-fledged developer platform.
New Banking Business Models
Gartner Research Vice President Kristin Moyer often talks about the need for banks to reimagine a ‘programmable business model’ that can “disaggregate business functionality and make it available for consumption by an outside entity through a marketplace.” Banks to date have struggled with conceptualizing and positioning themselves in this paradigm, while watching fintech startups and existing tech companies like Apple and Amazon disrupt the market they traditionally controlled.
This is what is most fascinating about the first three APIs released by Capital One, and gives an insight into how the bank is reorienting towards a new digital future. The SwiftID API recognizes the bank’s societal reputation for managing assets securely, and has extended this asset (along with the infrastructure that has been built over hundred of years to earn this reputation) into the digital realm as an API that developers can leverage as a signal of high-level security when creating end user experiences through their products and services.
“Developer innovation has been stifled by banks,” admits Anwar. “We are asking for a two way conversation. We are solving fundamental challenges where developers are working to solve real problems. We are looking forward to their innovations.”
Developers can register and test Capital One’s APIs at Capital One DevExchange.