Traditional business models and service delivery channels are being challenged and new entrants are quickly taking market share from incumbent operators. These changes are not only going to continue but will gather more steam.
As a result, the need for firms to be innovative has never been more important. Having the ability to quickly change to meet market demands is vital for future success and even survival.
For established financial firms, one of the biggest barriers to innovation tends to be the legacy systems sitting within their IT infrastructure. These systems may have supported operations for years but they can be difficult to evolve.
Within these firms, data also tends to be siloed. One part of a business may have no visibility of how customers are interacting with another. The vision of achieving a 360-degree view is little more than a pipe dream.
The role of APIs
Increasingly, financial services firms are coming to understand the role that application programming interfaces (APIs) can play in increasing the flexibility and capabilities of their IT infrastructure.
Any API program begins with a strategy - one which aligns the overall innovation APIs and allow legacy systems to connect with newer applications and databases enabling the provision of new products and service delivery channels.
Undertaking a successful API strategy requires a range of technical requirements to be in place, covering platforms, tools, and processes. Some of the key ones include:
Considering the full API Lifecycle: APIs need to be treated as ‘products' with IT teams focusing on their development, deployment, and ongoing operation. The lifecycle consists of three main phases: design and creation, consumption, and control.
Increasing interconnection: As financial institutions embrace APIs as the new currency of innovation, the requirements for broad service connectivity expands to meet the ever-increasing complexity and distribution of the IT landscape. This requires full API lifecycle support for both the traditional API gateway patterns as well as emerging service mesh patterns.
Having the freedom to develop: Increasingly, many financial organisations are taking advantage of one or more cloud platforms to support innovation. This frees them from a reliance on legacy systems and enables them to be much better able to meet changes in market demand.
The need for operational freedom: As the complexity of IT infrastructures increases, the challenge of managing and maintaining them also rises. While DevOps plays a key role in the continuous delivery of new services, being able to automate all aspects of the API lifecycle is also critical.
Infrastructure security: With the threat landscape continuing to evolve at a rapid pace, having effective security has never been more important. This needs to be fully considered before an API strategy is undertaken.
Privacy: Consideration also needs to be given to the way in which personal data will flow through and between APIs. Measures can include payload masking, redaction, or modification to protect or mask specific elements.
Zero trust: Financial services firms are increasingly adopting a zero-trust security strategy. When it comes to APIs, this will rely on having a powerful platform in place that ensures strong authentication and authorisation between all services and all APIs.
The importance of company culture
While technology plays a key role in any API-based innovation strategy, company culture is just as important. It ensures that the technology is actually used in the right way and delivers the anticipated business benefits. The key enablers for establishing the right culture include:
Having an API-first mindset: This establishes APIs as critical building blocks by which new digital products and experiences will be constructed. Understanding that APIs exist and are to be leveraged broadly across the enterprise and that new APIs will be built in an effort to contribute to the ongoing success of an API program is vital.
Discovery-led consumption: This mindset ensures an approach is taken that ensures effective API discovery and re-use. It’s similar to the approach used by an App Store on a smartphone.
Production with intent: When new APIs are created, they should be carefully designed with a clear purpose in mind. This maximises the chance of success and minimises wastage.
A successful API deployment
The success of an API strategy will ultimately come down to the benefits it delivers to the business. These will include an increased pace of innovation, increased revenue associated with new and better digital customer experiences, and a competitive differentiation from competitors.
Through having the ability to link existing legacy systems with powerful new web-based services and resources, financial firms will be much better placed to deliver the new range of services that customers are coming to expect.
Brad Drysdale, APAC field chief technology officer, Kong
