Corporate Culture and Lack of Understanding Hinder API Adoption at Banks

For the third consecutive year, Bank Innovation has teamed up with Open Bank Project and (this year) the University of Warwick, to conduct a research survey on how financial institutions worldwide are prioritizing API initiatives in 2017.

The report, which surveyed more than 200 high-ranking executives from financial services and banking industry, indicated a growing interest in open banking and APIs, with more than half of the respondents indicating that their organization uses partner-only APIs; more than 30% said that they use open APIs.

The increased interest is partly driven by the competitive environment in the industry, according to the report, which is (partly) triggered by the PSD2 in Europe, and the Open Banking Standard in the U.K.

However, despite the growing interest, many financial institutions still view the adoption of open banking as a threat, with more than 40% indicating that privacy concerns hinder API adoption at their organization. This was in-line with last year’s results. But more than privacy, company culture and lack of understanding place challenges to API adoption. From the report:

Lack of understanding of the technology and its benefits also appears to be hindering API initiatives; 46.2% of the respondents stated that this is an issue. Lack of experience with APIs and uncertainty about the details of PSD2 are among other issues that organizations face. The capacity and resources of banks and of their partners need to be appropriate before APIs can be adopted more widely. … Regulatory and compliance concerns are among the obstacles according to 32.1% of the respondents. Whereas banks see APIs as a threat to their businesses, other organizations see slowness and reluctance of banks in adopting open APIs as a challenge. Budget (30.8%) and technology (26.9%) are the other most common factors hindering the emergence of such initiatives within organizations.

Adopting API standards, as well as a flexible IT infrastructure could address some of this challenges, and streamline the adoption of open banking. From the report:

Regulatory requirements and an increased customer demand for innovative and efficient products may force banks to transition towards a more collaborative environment in order to remain relevant and find ways to profit together with other parties. This new environment encourages crossing the traditional boundaries of financial institutions, stimulating a move towards an open ecosystem.

The full report is available here.

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