APIs: should banks focus more on corporate customer experience?

Undoubtedly, APIs are the future of bank connectivity and essential for open banking. Ever since PSD2 has come into effect, the hype around APIs has been tremendous, but how do the corporates actually benefit from connecting to banks via APIs? As the take-off of premium APIs has been slow, we are yet to see the reality and the gains that those will bring.

Lack of API innovation from the banks: will it ever change?

So far, banks have introduced APIs that have been mandatory for compliance due to the PSD2, and these APIs have opened possibilities for new services to be developed mainly for consumers. Still, the corporates don’t have the same luxury just yet. This is primarily the case because the most innovative banks solely offer those so-called premium services for corporates, and the focus has been on a few specific use cases. Therefore, it will take a long time before there will be a full range of services for daily cash management.

The state of developer vs. customer experience with APIs enabling open banking

By searching, you can find the banks' developer portals that are usually truly just meant for the developers. Often, the description of the services is a few sentences. In most cases, the offering includes features such as instant reporting and payments, however, it is often unclear what the actual content is, and API functionalities can vary a lot between the banks. Suppose you are not a developer and do not have the understanding to dive deep into specifications. In that case, the content is even vaguer – it gets difficult for the average finance person to decide whether they could benefit from the specific bank API. This means that comparing what the APIs that banks offer is also tricky. Often the developer experience is still quite good and in many cases, praised a lot, but the actual customer experience around APIs enabling open banking is clearly not there yet.

Banks should focus more on customer experience with business-critical tools

The different Open Banking Monitors have been categorizing bank APIs through dimensions of functional scope and developer experience, but ultimately, customer experience should be the most critical factor. Currently, bank API offerings are always presented and documented for the developers. Why is this the case? The bank's API strategy is often or almost always meant directly for a specific use case to be used directly in the backend system. I can see why this is happening: in the short term, this approach can differentiate the banks and possibly create a competitive edge. However, this approach feeds the API fragmentation that is already clearly visible amongst banks. From my point of view, this is one of the biggest reasons why we are still in a situation where service consumption in corporate use cases is still in its infancy. Not many corporate decision makers would want to use a new business-critical service and maintain it in-house, especially when API fragmentation and security concerns exist.

Good news: there are some forerunners in the banking API space

There are clear forerunners amongst the banks in this race to deliver stellar API experiences to corporates. By researching the space and going through Open Banking Monitors, it’s great to see that many Nordic banks are rated as innovators as part of the functional scope and considering the developer experience. But we need to talk more about the customer experience. It should be easy for corporates to take new premium APIs into use. Now looking at the situation in the Nordics as a Finnish citizen myself, I’m proud to see that there are also innovative API strategies that consider the customer experience. For example, some banks offer corporate premium APIs through cash management solutions and service providers.

What does this mean for customer experience? Premium APIs that can be adopted through solution providers will not only remove the implementation and maintenance headache but make the API development process as simple as it should be. The simple yet great customer experience starts from selecting the services and signing the agreements online. Then, the customer just needs to choose the service to be provided through the service provider. In these cases, we are talking about just a few clicks to get the services up and running and facilitate the real-time data flow between the banks and the cash management solution.

Banks are partnering with TMS solution providers

Transforming your treasury and cash management by utilizing instant services and enabling them to add value to your operations should be as easy as downloading something from an app store. Most advanced banks are moving in this direction. They realized that partnering with a TMS solution provider could deliver a better end-user experience. The service provider is the one that sets up APIs and monitors the APIs to implement updates when changes occur on the bank’s or the customer’s side. Simply put, corporates just select and subscribe to using a bank API through their service provider and start getting instant data from the bank to the TMS system. Everything happens online and without delay. This also enables multi-bank API aggregation without worrying about the different technical specifications, versions, and overall API fragmentation from different banks.

APIs are the future of modern corporate banking solutions

What can we expect from the future? We already know that some banks will stop developing new services for corporates entirely for the old channels and further development will focus only on API connections. But our concern should be how long it will take before this becomes the new norm with all your banks and how easy it will be to use the new services and APIs. This will mean that the existing channels will still exist for a good time. However, these new services will be essential decision-making factors when corporations choose banks for cash management. Banks that won’t be able to deliver innovative solutions that the customers want will be eliminated from the selection process, or at least they won’t make it to the final rounds. Some banks are already more innovative than others, and we expect to see more banks follow with new innovations and partnerships with TMS providers on the API side.

Open banking should be more than just a few specific services available for corporate clients. It should be about the full ecosystem and the possibility to start using the new API services easily, quickly, securely, and most importantly, in a future-proof way. Unfortunately, that can’t be achieved when the API adoption rate is still too low, as starting to use an API requires too many resources from the corporates.

The current state of bank API development

At the moment, we can categorize banks into three different baskets based on their API maturity level:

1. Providing the bare minimum compliance APIs established by utilizing third parties
2. Compliance APIs developed in-house and plans to extend the offering gradually
3. Innovative banks that have invested in API development and already have a premium offering

What does this mean from a business-to-business point of view (side-tracking the developer experience for a second)? The future is innovative APIs offered by banks. Still, at the same time, those should be easy to purchase by the corporates and connect with the existing cash and treasury management solutions. We expect that many banks will follow the example of innovative banks and offer solutions together with TMS providers. So, to take APIs a step further and achieve a higher adoption rate on the market, banks and TMS providers should collaborate and agree on partnerships.

One thing is for sure: we are excited to follow the development of open banking APIs and join banks in providing new services to corporates.