10) Advances in new technologies, and maturity of others, have provided opportunities for significant change and disruption to financial services and other related activities globally. Powering this innovation are APIs. APIs can fuel internal innovation, reach new customers, extend products and create vibrant partner ecosystems. APIs by their very nature allow for rapid prototyping, agile development and a fail fast, learn quick culture. They provide a way to share, move and access information previously ring fenced within isolated systems.
11) “Big Tech” companies3 are opening up access to vast resources and computing power providing access to cutting edge technology, such as machine learning neural networks, blockchain development tools and even quantum computing, that were previously unavailable to the wider market. Additionally, in recent years there has been wide adoption of open-sourced technologies, giving developers suites of tools to create new programmes, systems and networks.
12) Combined with the ever growing surge of the use of smart phones, consumers are now expecting seamless digital interactions tailored to their own specific needs. Which in turn is giving rise to the ‘Challenger’ or ‘Neo’ banks who are focused on providing customers with personalised ‘experiences’ rather than standard financial products.
13) These new business models represent a fundamental step in the evolution of the financial services industry and have already disrupted more traditional ways of offering financial services. For example, ‘marketplace banking’ business models, i.e. exposing internal digital business assets or services in the form of APIs to external counterparties, is creating an entirely new ecosystem of banking services predicated on intelligent data management and agility in developing new products. The creation of and broadening of access to new data assets are in turn creating many new opportunities for both incumbent and start-up organisations. Fundamental to the development of this new paradigm is the “API economy4” which facilitates efficient and secure access to data and processes held at different actors within the financial services sector.
14) However in order to realise an efficient API economy, APIs must be able to ‘talk’ the same language. In recognition of this, several open banking initiatives such as in the UK5, the EU6, Singapore7, Hong Kong8, Australia9 and New Zealand have taken this one step further to maximise interoperability and collaboration, by mandating certain Financial Institutions (FIs) to make data available (in the banking sector, often termed “Open Banking” or “Open Data” in a broader context) according to strict standards, predicated upon API usage.
15) While the FSRA does not propose that Open Data or APIs are made mandatory it does see them as an integral part of any FIs digital strategy and as such will look to align with international best practices so as to maintain a safe and trusted digital environment.
3 These include some of the world’s largest multinational technology corporations, e.g. Google, Apple, Facebook and Amazon.