Designing and Executing New Business Models in the Financial Industry

By July 16, 2020 April 2nd, 2024 No Comments

I have the pleasure of introducing FinConecta’s White Paper on new business models and API monetization.

All the technological advancements in the digital era are enabled by the use of Application Program Interfaces (APIs). As critical components, responsible for securing the communication between programs, APIs are present in almost every application. Like Lego pieces, APIs are the building blocks needed to create new digital services. Besides allowing the interaction of existing players, APIs are priced products able to positively affect a company’s profitability.

Businesses can leverage APIs to scale their operations, attract partners or extend their market reach.Thanks to API development, adoption and proliferation on a massive scale, the API economy is on the rise. New API-based business models are emerging disrupting all the industries including the financial sector.

The Open Banking model marks a global evolution in the financial market. Motivated by the increased need to attend customer demands, compete with new financial players and meet regulation requirements, banks are adopting API-based business models. Open Banking emerges in the financial industry, as a new model of collaboration with third party providers.

By sharing financial data and business functionalities, banks are expanding customer reach, accelerating the adoption of new technologies and creating new revenues. The regulatory agenda is certainly playing a central role. Regulators around the world, often driven by financial inclusion mandates, are progressively promoting the shift to open ecosystems by launching directives and frameworks.

Along with Open Banking, the API economy opened the door to more advanced dynamic collaborative models. Through these API-enabled business models, banks are beginning to transform themselves from infrastructures that offer individual services to robust platforms that offer full capabilities.

Creating interconnected integrated ecosystems enables financial institutions to deliver on ever-raising customer expectations, as well as taking maximum advantage of the benefits of a flexible infrastructure.

For most, if not all organizations -including financial institutions, the API economy proves to be a viable avenue to creating new services and capabilities, that will successfully lead to new sources of revenue. With the mainstreaming of APIs and the popular services that make use of them, financial institutions will make APIs a key component of their business model. What’s more, the accelerating progress of mobile technology and the Internet of Things, creates little doubt that the API economy will continue to grow and flourish at a rapid pace.

Moreover, the dramatic social shift that COVID-19 realized in a matter of a few weeks and with global consequences, constitutes a burning platform to envision a new era in the financial sector. Future-compatible leaders are up to the challenge to reinvent financial services, to be more inclusive, ubiquitous, simple, relevant, embedded in people’s lives.

With this paper, FinConecta aims to contribute to the worldwide initiative of bringing sense and purpose, as well as a way forward. Hope you enjoy it!