Open Banking PTBR

disruptors of their sector. The question is: will they know how to use their strength? This year's research indicates that in order to avoid competing against fintech alliances and the tech giants, banks need to do two things: 1 Adopt a Strategy-with-APIs approach, and 2 Consider a RISK strategy. 1. Strategy-with-APIs and API-first business The key word in Strategy-with-APIs is Strategy. This isn't about putting APIs first, it's about putting strategy first, and using APIs to implement it. It's a subtle but important difference, for two reasons. First, "API First" business and architectural approaches haven't truly worked. Banks have been led to the API agenda for two main reasons. Globally, the need to create mobile applications and speed up product development has meant that APIs have been seen as a useful, reusable software development design approach that can speed up future feature and product development. Several banks recognized this and began trying to modernize their architecture to make use of APIs. Simultaneously in Europe, the Second Payment Services Directive began to be ushered in, requiring banks to make payments and account information available in a frictionless way to more accredited third party providers. Banks have taken up these challenges by reorienting their legacy architecture towards APIs and microservices. Often this has been done by IT and technical teams, who have then had to try and explain the business benefits of doing so. Taking an "API First" approach has helped many banks build APIs. But banks in this position still need to take a product-based approach if they want to see their APIs gain traction and to ensure the value they have baked into their API will materialize. So far, for banks, API First in itself hadn't worked. The second key reason "API First" business approaches didn't work is because building APIs first leads to then thinking about what business models will suit those APIs. Pricing models for APIs have not been tested, and there can be a disconnect here around expectations for new revenue for the APIs being introduced. Instead, the focus should be for an enterprise to look at its business model, and see what are the best APIs to realize that vision. Then the pricing models will come that match those goals. API industry leader John Musser makes this point when he talks about what key performance indicators are necessary for APIs: "To measure the impact of APIs, you first need to understand what business goal they are trying to achieve and then you can measure if the APIs are helping you get there," he says. A Strategy-with-APIs is about putting value first. APIs and microservices become essential components in generating value. They are a way to create the infrastructure that will foster an ecosystem. That means an internal ecosystem first, where business units and partners can use organizational assets to speed up automated processes and internal product development, and then an external ecosystem so that third parties can help a business enter new markets or appeal to existing customers in new ways. This year's research suggests that many banks are somewhere between these two approaches. API First may have been the initial impetus for modernizing architecture or for reasons of meeting regulation. But now that those technological reorientations are underway, IT teams are increasingly seeing the need to get line of business buy-in for owning the APIs and treating them as products that can help achieve wider business goals. That education process varies from bank to bank: some have advocated successfully internally and have lines of business identifying use cases and owning the API creation process. Other banks are still setting up internal governance processes so that APIs are created in a standardized manner and have the potential to be shared first internally, and then monetized with partners or third party developers. However, there are some changes emerging. One banking executive's comment summarized similar experiences from a number of interviews: "We invested a lot to get the API mindset in the company. On the tech level, it is well understood, and the line of business has a vision of what they want to achieve and from that we discuss whether an API is the right strategy. Now we are seeing the business side being ready to expose an API to the outside world. You see more and more that it is growing in understanding across the bank." Implementing a Strategy-with-APIs still requires a focus on reorienting the IT architecture, and for most banks that work is currently being done. But now the focus needs to be about setting up a layered structure that will enable the business strategy to be executed effectively. The Crucial Role of API Management Any bank that is looking at a platform play or plans on seeding an ecosystem will need an API management solution in place. API management provides the core functions that enable a microservices and API-driven approach, including the basics like authentication and identity access management services, metrics to 07 The RISK STRaTegy

• Cover