Читать книгу The FINTECH Book - Chishti Susanne - Страница 17

By Rachel Nienaber

VP Engineering, Currency Cloud

Historically, banks have been responsible for most innovations in the financial industry. The inception of the credit card in the 1950s and ATMs in the 1970s completely revolutionized the way we access and pay for goods. Jump forward to 2016 and it is a very different story. Those developments came decades apart, but following the significant growth and accessibility of the internet and the technology that advances in its wake – including smart phones, big data, social media, and cloud computing – demand has come from consumers to make it even easier to manage their finances. As such, financial innovation is no longer restricted to those institutions, allowing outside players to creep in to shake up the industry.

The financial sector has continued to witness many impressive innovations and technological advancements such as contactless technology, digital wallets, and crypto-currencies. However the innovators are now rarely banks but small FinTech firms. These are often led by former bank employees who have identified a gap in an existing offering or service.

Application Programming Interface (API) is the term used to describe a set of tools that enable different software components or systems to effectively communicate with one another.28 Using an API, banks or challenger financial services providers can incorporate the technology from FinTech firms into the key areas in which support is required – simplifying the process of adding innovative technology services by piecing together building blocks of flexible services, much like financial lego.

With financial lego APIs, IT leaders within businesses can create their own financial IT solution or support other internal processes without having to build every piece of the technology from scratch. Instead, they can mix and match a portfolio of financial technology APIs to create a bespoke solution where the development team can integrate the functionality of the APIs as part of their technology. For example, banks and payments firms can send money internationally through Currency Cloud’s API, rather than having to develop proprietary technology.

The flexibility of APIs means that it is also easier to create experiences that users will enjoy because the experience can be easily decoupled from the system behind it. Barclays’ development of mobile payment service Pingit is a great example of this where opening their API has helped in bringing a successful new service to market. Pingit has experienced extraordinary growth since launch in 2012, with users in London alone sending more than £60 million via Pingit in the first six months of 2014.

Despite the scale of innovation sweeping across the financial services industry, many banks still retain their R&D behind closed doors. Understandably, security is one of their top priorities and rather than risk sharing information with another party, banks tend to only trust themselves. While this means that the threat from the outside is limited, it also means that there can be no external development. And we just need to look as far as the success stories from Apple and Google, who routinely open up their APIs to outside creative minds, to understand just how valuable and exciting the results of the latter can be.

Developed in a pre-internet era, banks’ business models and technology infrastructure has largely been constructed around product sets and delivered through the branch. In other words, banks were not built to serve today’s fast-paced and digitally savvy customers. As such, a whole host of technology players have taken the opportunity to develop innovative alternatives, built on flexible platforms that can adapt to this changing environment. PayPal is one of the first notable examples of a successful solution that provided great benefit for the customer and since then has paved the way for an explosion of alternative services, offering everything from investments to international payments, loans, and bank accounts. From the likes of Kickstarter and Seedr, which have been leading the crowdfunding market for some time, to Amigo which provides personalized credit approval, and Transferwise which offers consumers cheaper access to overseas transfers, these firms are redefining old verticals or creating entirely new ones.

Yet, the rise of FinTech newcomers in the industry does not need to send banks panicking about the challenges involved with overhauling their entire IT infrastructure in order to compete. The “us versus them” debate that has gained perpetual popularity does not provide an accurate picture of the relationship between FinTech innovators and banks. Let us be very clear, the banks are the cornerstone on which our economies are built, they are the rails on which most FinTech firms operate and they are not going away in the near or even the distant future. However, we are creating a fundamentally different way of viewing and approaching the industry.

Tech start-ups look at this financial services landscape and using the rationality of the internet, see poor customer service and room for tremendous efficiencies. The same logic has been applied in other industries such as music and telecommunications, which have also been completely transformed by the power of new technologies and the internet. What a traditional bank might view as a threat in the digital age, their more nimble counterparts might see as an opportunity. The result is a wave of FinTech firms that look to optimize particular segments of the financial value chain (whether that be international money transfers, loans, or payment processing) and offer their specialist services to other businesses and banks, via APIs. A company that wanted to support musicians could, for example, use one technology firm such as Kickstarter to provide loans, and another firm such as Currency Cloud to make the payment. The success of these players is in part due to their ability to focus on a very niche segment of the industry, rather than trying to compete on all levels. Banks on the other hand, have always tried to own every aspect of the financial services spectrum, yet this is where they are now struggling as alternative players offer up more sophisticated services for customers within a specific niche.

Despite their differences, both FinTech players and banks have much to gain from working together. FinTech firms can benefit from the long history of banking operations and the foundation that banks provide. They are a vital part of the puzzle as the banks provide the financial instruments that FinTech firms package up in different ways, at the same time concentrating on one specific use case at a time. Banks can simultaneously gain value in new players – whether that means looking to partner with them or acquire their advanced technology offerings. Using API capabilities delivered in this way can help banks to expand services internationally, reduce development costs, and unlock fresh revenue without having to invest in and build new architecture.

The growth of FinTech and push for open access to financial data has been noted industry-wide as the government continues its support of FinTech firms and the development of the UK as the world’s most exciting financial hub. It is not all that surprising that they have recently announced plans to create a consolidated, open API standard for banks. The government has committed to launch a call for evidence on how best to deliver an open standard for APIs in UK banking and to ask whether more open data in banking could benefit consumers. While the start of this process has been to discuss the product banks offer, what FinTech firms are really interested in is the next step: opening up the transactional data from within a bank. Banks, however, are still very cautious about giving outside developers access to this type of data and it will take many more discussions before such a move becomes a reality. It may not have been the strides that we had all originally hoped for when we heard about the open standard but at least it is a very good start. This is an encouraging step forward for the industry. We have already seen how nurturing the API economy can provide the industry with a large dose of innovation, and with further support it will undoubtedly continue to produce new opportunities for both banks and the up-and-coming alternative players in this industry. With the UK government putting their faith in these successful newcomers to take the industry forward into the 21st century, this further indicates that alternative players have done a successful job of proving their value to the industry – and such credibility will continue to grow.

There is much to gain from FinTech firms and traditional banks embarking on a collaborative relationship to discover and define the future growth potential within the industry. We strongly believe in working with, rather than against, the banks and we are in no doubt that collaboration with forward-thinking technology firms will ensure that the finance industry continues to innovate.