Banking APIs – Technical View

Highly popular as a means to create open environments and easy data sharing with consumers and businesses – APIs are now everywhere. Also in Banking, APIs are being rolled out at high speed, and in some regions even promoted through local regulations such as PSD2. However, open Banking APIs are also clearing the field for new entrants.
How will banks cope with this potentially disruptive change? Will large social media networks, e-commerce platforms or online payment systems disintermediate banks? Or will banks be able to bring brand new services and increased convenience through this technology and new partnerships? In short, will APIs in Banking be a business-threat or a must-have in order to survive and grow?

APIs are fundamental to Societe Generale’s digital transformation. Like Lego bricks, APIs can be put together in different ways and reused to create innovative products and solutions. They can be developed internally or sourced from an external operator and layered on top of each other to transform legacy systems or create new ones. In creating new products and solutions with APIs, top of mind always should be how we as a bank should interact with our customers and clients, and how we deal with the consequences of regulation. How our clients will use payments services in the future is unknown, but we can alleviate this uncertainty by ensuring that in terms of systems and product development, we are as agile as possible. As building blocks, APIs give development teams the agility to quickly respond to new regulations or new challenges with innovative products and solutions.

Societe Generale has created more than 600 APIs to date and more are added daily; the target will be in the tens of thousands. This technology enables us to be much more efficient in our digital transformation efforts and to be excellent in what we do.

Alain Fischer
Chief Digital Officer - Societe Generale

APIs enable developers to be very creative in the way they answer the needs of clients and of regulators. SG is transforming everything on its legacy systems into a set of APIs that can interact with our platform, SG Market. A catalogue of APIs has been created, which enables staff to choose what they need, assembling the APIs in different ways to create products and services.

We are using APIs to transform our internal solutions to fulfil both our business requirements and the requirements of our clients. APIs help us to more closely interact with our clients by sharing the same platform and vision.

Philippe Mirland
Head of Banking Solutions Engineering for GTPS

The Payment Services Directive 2 will enable banks to broadcast and share their catalogues of APIs to other parties. Banks that are not pursuing digital transformation as a strategy may find this a threat, but those that are transforming will view this ability to source APIs as an opportunity. APIs will enable banks to be more innovative and to decrease costs. From a technical viewpoint, banks must decide which APIs they will share internally and externally. Any decision will be based on what the market is pushing for, influenced by regulation such as PSD2 and customers’ appetites for particular solutions.

Financial institutions have a long-established record of working with financial technology companies (fintechs), but in the past these companies were often ‘reinventing the wheel’. APIs make collaboration much easier, as fintechs can use and reuse the existing building blocks and no effort is wasted. Banks also must ensure that as they transform into digital organisations they create their own building blocks as well as using those of third parties to create a global set of building blocks.

Banks are entering a new world where libraries of APIs exist and when a new, superior API is created, it can replace the former. This modular approach, based on continuous delivery, spells and end to the need to rebuild entire systems to adapt to changing customer requirements or regulations. New solutions can be more rapidly put into production because only one piece of the entire picture is changed.

All banks have significant and complex internal legacy systems that must be kept running. APIs can hide the complexity of these legacy systems from users and from the end clients. Legacy systems do not have to be replaced, they can be transformed with the addition of API layers that deliver agility to the front office while enabling stability at the back office.

In an Open Banking environment, financial institutions must ensure that whatever they build in terms of APIs, they must be compliant with internal security. Every day, banks face cyber-attacks and must therefore be conscious of the need to monitor who enters their systems and be able to authenticate APIs users. Open Banking must not mean an open door into systems.

The API Lego bricks can be built and amended as many times as required, with capabilities added as required. IT teams are developing a component mindset, understanding that APIs can deliver greater agility, which translates into speed to market with new products and services.

Jean-Luc Smadja
Chief Information Officer