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APIs are good medicine

RBS has been formulating its API strategy over the past few months.

APIs will enable us to extend our banking platform and capabilities to third party application providers as well business customers, both large and small. This is why the strategy discussion should not be limited to a discussion about PSD2 or HMT’s OB initiatives.

Is opening up access via APIs a good medicine?

The first concern cited is usually the thought of dis-intermediation – someone coming between the bank and its customers. Is the fear of dis-intermediation legitimate? Unequivocally, it is a real and present danger. But before we examine this question, let’s raise the level of the discussion beyond APIs to Apps.

App economy is built on solid foundation of the API economy

APIs in and of themselves provide no value. Value is only realised when APIs are integrated with applications of some kind. Now, when we think about the disintermediation question, it is clear that if the bank merely provided APIs, with no end user experience (UX) in the form of APPs, then it could be described as a utility. RBS will not do that because we covet maintaining direct links with our customers – we will build and deliver APPs that utilise the APIs while simultaneously permitting, nay encouraging, third party FinTech developers to do the same. We call this co-opetition.

Why is third party App development good?

The reason third party development is a good thing is because they can offer a breadth of solutions for our customers that we could never offer. Many Apps target narrow and niche user segments, whereas others provide broad ranging horizontal functionality that appeal to many users. It is axiomatic that there are more smarts outside the bank than are inside. Doesn’t it make sense to enable, rather than hinder, these third parties to provide a conduit whereby we may tap into those smarts and expose our services through a whole range of rich applications and user experiences?

But the bank will compete, in at least in some segments. The segments the bank will look to first will be horizontal, broad ranging functions affecting the majority of our users. Some customers will continue to use bank supplied Apps – it feels safe to them. On the other hand, there is a young and adventurous segment who will have less reserve and are always eager to explore, especially with anything that is trending and going viral on social media. The winners in the banking App game will be those that win users through an engaging user experience. But users are fickle, and although they are reticent to change banks, we suspect they will be willing to change banking App providers with frequency and impunity.

Why is RBS hosting Hackathons?

In order to dip our toes into this new API ecosystem, we started running Hackathons, doing 8 in the last 18 months. Lots of people ask: what do we get out of them? Almost everyone assumes we do them in order to generate ideas. The generation of ideas is a happy and pleasing side-effect but the real reason for us to get involved in Hackathons is to learn by experience what open innovation is. They are also a useful tool to effectually and convincingly engage executives and staff.

In order to grow the value of the Hackathons, we decided it would be advantageous to have our own developer sandbox dubbed BlueBank. We have found that a third party fintech company can integrate an app with BlueBank in a couple of hours! This surprised us, and gives huge confidence that: “if we build it, they will come.”

#BANKOFAPIs

We decided to register the domain: bankofapis.com along with the Twitter handle @bankofapis. The rationale behind this move is that as we seek to market our API capabilities, we want to become known as THE #BANKOFAPIs.

Cultural Impact

Something we have noted when running Hackathons that was counter-intuitive is that people love to work

this way. In a Hackathon, people voluntarily give up their weekend to work intensively. The experience is enlightening and the excitement is palpable even to the curious who stop by to observe. The whole thing is far, far removed from the perfunctory routine of any regular job in the bank. Could we begin to start a cultural revolution, a staff-engagement reboot, where there are lasting effects that can be empirically measured by a new order of staff enfranchisement and a shared belief that we can tackle the biggest problem that faces us, the lack of ability to make change with pace and alacrity? We all believe that “Culture eats strategy for breakfast.” Full English please!

By Alan Lockhart, Bank of APIs (RBS) 

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