Case studies that will open your eyes to new possibilities
Banking is changing
All over the globe, demand for digital experiences, competition from technology firms, and rising regulatory pressures are forcing banks to re-think existing business models and expose their capabilities as APIs.
Open banking API products do not yet reflect the full range of opportunities that open banking can foster. 2020 brought dynamic, strategic leadership amongst card processing, payments providers, and API aggregator services to create vibrant, open finance ecosystems around their platforms. These platforms aim to make it easier for businesses and startups to build new financial services and products that meet consumer and business demand. They are focused on integrating financial services into existing customer value journeys.
Open banking could similarly expose financial functionalities that enable these types of services to be created, but to do so requires banks to work with external partners, leveraging business models that share revenue amongst various stakeholders. While there are some banks moving in this direction, it is a small subset of leadership banks rather than the industry as a whole
The brief examples in this guide will help you understand the value open banking and finance APIs can bring to your business – and open your eyes to new possibilities.
Build partnerships to expand your bank’s reach
APIs open new opportunities to serve the unbanked and underbanked
In some parts of the world, retail banks have achieved peak customer reach. In others, potential customers choose fintech apps over bricks-and-mortar branches. To adapt, banks are opening their APIs to new ecosystems, enabling them to serve people who previously couldn’t or wouldn’t participate in traditional banking.
There were 1.7 billion “unbanked” adults around the world in 2017, with no account at all.
In just the past couple of years, 16% of adults in the U.S., 4 out of 10 Singaporean adults, and 8 million in the U.K. remained “underbanked,” without access to credit cards, loans, and other traditional services.
Millennials – 1.8 billion consumers born between 1981 and 2005 -- are the great underbanked generation by choice:
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33% believe that in 5 years they will not need a bank account at all
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38% prefer to use their phone to pay bills and transfer money
In Indonesia, for example, over 150 million consumers prefer to use fintech apps and products rather than traditional banking services.
Several banks in Asia-Pacific have discovered how to reach these untapped markets using APIs. For one bank, partnering with trading apps and crowdfunding platforms has increased new customer acquisitions by 375%. The bank’s partnerships allow users to open a bank account directly within the fintech product.
For another bank, partnering with an e-commerce platform has created relationships with thousands of merchants. Each merchant has now opened a bank account to help transfer funds from their e-commerce sales on the platform.
New Possibilities
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Partner with fintechs to reach unbanked and underbanked without adding new branches or staff
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Acquire new customers from third-party trading apps, crowdlending platforms, and e-commerce marketplaces
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Generate revenue from transaction processing through APIs
Be at the right place at the right time to gain new banking customers
APIs open new opportunities to integrate directly with the platforms, apps, and services where people do business
A constant stream of qualified, stable loan customers is at the heart of growth opportunities. By leveraging APIs, banks can reach people right when they are looking for a loan product, drawing in new long-term banking customers to increase revenue and build a new customer base.
In Australia, a bank leveraged open APIs to connect their services directly with apps and websites. Small business customers can access their bank accounts directly from leading financial accounting software. Real estate websites include loan simulators and bank product catalogs so customers can get real-time information on bank financing right next to details on houses for sale.
In Singapore, a bank created API integrations with direct seller-to-buyer car marketplaces. To date, over 350,000 people have visited the car marketplace, with new loan customers linking directly to the bank.
New Possibilities
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Be where your customers are when they are making finance decisions
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Offer loans and bank products as customers need them
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Retain customers by integrating with their daily activities
Put a bank branch in everyone’s pocket
APIs open new opportunities to deliver services to anyone, anywhere
Using APIs, a bank can create mobile apps. But by using open APIs, the bank can also expose that same functionality to other integrators at point of sale, via online e-commerce sites, or even embedded into another app.
One European bank created a peer-to-peer free payment mobile app service available to anyone, whether they are an existing bank customer or not. Transaction processing fees provide some revenue. But the widespread acceptance of the brand elevated the bank to be the first point-of-call for business payment functions as well. They now have over 25,000 businesses using the same payments functions they first made available in their mobile app.
Results
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After 1 year: 1.4 million mobile app users
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After 3 years: 3 million mobile app users
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25,000 businesses using payments functionality
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3,700 e-commerce merchants using payments API
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Revenue of $23.1 million, 80% from transaction processing fees via API
New Possibilities
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Build mobile apps and make the components reusable as open APIs
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Increase revenue without increasing operational overhead
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Extend network reach to interact with new customers
In Asia-Pacific, a bank offered open APIs to an agents’ network spread out across the country. This enabled merchants without payment licenses to act as agents that offer their clients cash-in and cash-out transactions. The agents can also access additional financial services, such as credit scoring, via API. New agents can now be onboarded within an hour rather than over months, and the bank now generates over $50 million in revenue without any brick-and-mortar branch management costs.
Results
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320,000 branchless agents
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Revenue of $50 million per year
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Onboarding process for new agent partners reduced from 6 months to 1 hour
Help corporate banking customers automate workflows and improve liquidity
APIs open new opportunities to expand relationships and build customer loyalty
Open APIs are used for more than just building banking products. In many cases, they are used by existing corporate customers who want to use a bank’s APIs to automate internal workflows or integrate bank data directly into their business processes.
Banks in Asia-Pacific and Europe report that around 80% of their open API users are corporate customers. These customers are less likely to switch banks because they are integrating their accounts directly into their processes via APIs.
A commercial bank in the U.K. has helped enterprise customers improve liquidity and working capital using payment APIs and real-time notifications on bank transactions.
In Asia-Pacific, a bank helped an airline eliminate manual processes and improve reconciliation from 2 days to almost real-time.
In the U.S., a leading commercial bank’s open APIs enable corporate customers to move funds between accounts with real-time foreign exchange pricing based on interbank rates.
New Opportunities
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Retain customers by integrating bank services directly with their business processes
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Respond quickly to new or changing business needs
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Build customer loyalty and enhance lifetime value for corporate customers
Make your bank a finance hub for small businesses
APIs open new opportunities to integrate offerings into day-to-day financial management
Business customers with at least one integration into their bank account are less likely to switch accounts and more likely to open multiple business accounts and seek other bank products. But small businesses are also ready to switch banks if they find a better solution or a greater range of products that meet their business and financial needs.
Banks are using APIs to create marketplaces for small and medium enterprises and generate revenue from partners that pay to be part of the marketplace platform.
A U.K. challenger bank now sees payment processing transaction fees doubling month over month from business customers who use their bank accounts as a central finance hub.
A U.K. bank is now earning $2 million per year from platform revenue through marketplace partnerships, up from just $6,700 in its first year of operation.
Customer acquisition and management costs for new business customers are also dropping, with administrative expenses per account dropping to one-third of the costs from two years ago.
New Opportunities
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Grow customer base
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Enable three key revenue streams: interchange (payment processing fees), marketplace commissions, and platform services revenues
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Reduce customer acquisition costs
Read the Open Banking APIs State of the Market 2020 Report
Who is Axway?
Axway has helped more than 11,000 companies move forward faster and create brilliant digital experiences using our Amplify API Management Platform.
What we do
Axway revitalizes heritage IT infrastructures to unlock new digital experiences and business capabilities, and put companies on a secure, future-proof path for growth and change.
How we do it
With Axway Amplify. Use the IT infrastructure you already have to:
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Move to the cloud and enrich your customer experience
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Accelerate innovation by rethinking your integration, API, and service delivery
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