How APIs Are Fueling the Mobile Banking Wars

While some folks tend to think about APIs are being little bits of arcane code that only developers care about it, the truth of the matter is that billions, possibly even trillions, of dollars are at stake in what will soon be a series of API wars. In no place is this more important than in mobile banking, where companies ranging from Google, the PayPal unit of eBay and lesser known entities such as MineralTree are all vying to usurp the role of traditional financial institutions.

All three of those organizations have all launched payment services that are accessible via an API. Google and PayPal are focused primarily on consumer transactions, while organizations such as Mineral Tree are now trying to apply the same concept to transactions in the small-to-medium business (SMB) space.

MineralTree CEO BC Krishna says roughly 29 million SMB organizations are processing $24 billion worth of checks at a cost of about $1.50 a check. The MineralTree payment service is intended to allow those organizations to process payments at a fraction of the cost.

Obviously, Google with Google Wallet and PayPal are chasing that same multi-billion opportunity at the expense of financial institutions around the globe.

According to Emanuel Sardet, global Technology and Infrastructure Services lead for Accenture Financial Services, because these services are all readily available to the cloud, customers are often opting for the path of least resistance, especially when those services are already tied into their credit card accounts.

Not only are companies such as Google and eBay after this business, Sardet notes that it won’t be long before telecommunications carriers leverage their services to extend their smartphone and tablet franchises in this lucrative direction. In effect, the rise of cloud computing, says Sardet, will result in the convergence of kinds of financial-related services that might ultimately lead to an industry wide consolidation of a whole raft of transaction-oriented services.

Patrick Molineux, chief strategy officer for the Financial Services Group within the IT services firm CSC, says this situation has made financial services companies desperate to stay relevant, which is why so many of them are focused on providing mobile computing services. The thinking is that as many of these transactions will be initiated via a mobile computing device, which means whoever dominates that Platform will win. The trouble is that for every one application a financial institution creates there are thousands of developers creating application and Web sites that leverage APIs from alternative payment services.

In fact, a recent Connected Consumer and the Future of Financial Services report published by CSC says that “for the first time alternatives to cash for mainstream payments of all values for all people are becoming available and economically feasible” as part of a worldwide payments revolution. Of course, the main technology fueling all that revolution is none other than the oft overlooked and under-appreciated API.

Be sure to read the next Financial article: The Rejoiner API: Analytics, Marketing and Revenue