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APIs are like putting lipstick on pig or a revolution? BUT who standardises chaos?

APIs are already a revolution of sorts - not as much as some experts think (see MW comment on previous post who thinks APIs are like old wine in new skins because just same as H2H connectivity), but it is clear that APIs are starting to run into their limits, unless they are standardised (to some extent):

  • NACHA have completed an exploratory effort with Accenture on API standardization for the US Financial Services industry which showed that API standardization can provide improved security, transparency and efficiencies, and enhanced support of payments innovation 
  • Nordea’s preparation for PSD2 with first iteration their Open Banking portal which will act as the channel for dialogue with partners and third-party developers as they standardise how they will work with third parties
  • Citi is planning to roll-out their APIs across their whole transaction banking offering. This roll-out will have to adopt APIs used by other third parties
  • Ignacio Juliá Vilar, Chief Innovation Officer and Head of Retail Banking Segment at ING Group, in an interview in ThePaypers, commented, “One of the biggest lessons learned is that standardization is not easy, even in Europe. We see different levels of maturity, in different countries.” They are currently working with 80 fintechs while other banks talk about 100+.

Are standards really necessary? Who is going to do this?

Yes probably, but the fintech companies don’t move at the same pace as ISO and the banks/FIs, they just won’t wait. So who is going to do this at the speed needed?

CTMfile take: Is there a way to avoid the impending slow-down in development?

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By Robert J Blair on 13th Mar 2017:

I couldn’t agree with you more Jack.  APIs have been around for a long time.  Its their standardization that’s necessary to convert promise to reality.  Could an end user communicate across multiple bank relationships with a common protocol and security?  In a number of cases the standards are already there, its how they are assembled, options used which introduces the variations.

By Robert J Blair on 13th Mar 2017:

And something more on the topic from the latest EPC Newsletter (issue 33, March 2017)below.  In short, there are multiple efforts to define standards in Europe alone. 
Personally, the topic begs for a more aggressive standards “footprint”.  Its not the absence of standards that the issue, rather the lack of agreement on which standards to use and how to assemble them into a whole.

Several European initiatives are developing ‘open banking APIs’ that will be open to any PSP. They do not require massive investment costs but do maximise standardisation.

One of the most advanced of these initiatives is ‘UK Open Banking’. Part of it is specifically dedicated to APIs. Following an Order from the UK Competition and Market Authority (CMA), the nine largest UK banks were tasked to “adopt and maintain common API standards through which they will share data with other providers and third parties.”* By January 2018 an ‘Implementation Entity’ will deliver several API standards (one for each scenario: payment, aggregation, etc.) for use by PSPs on the British market.

And what about API standardisation in a broader European context? The Euro Retail Payments Board (ERPB) recently set up a working group on Payment Initiation Services (PIS) co-chaired by the EPC and Ecommerce Europe. It will define a common set of technical, operational and business requirements for the development of an integrated market for PIS while considering possible implications and synergies for other new services regulated by PSD2 (i.e. account information services and confirmation of availability of funds). As it seeks to maximise the interoperability of APIs throughout Europe, this working group will most likely take into account the set of API standards being created in the UK.

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