A well-designed API strategy should unlock a range of revenue opportunities for FIs by identifying data streams to monetize, identifying new customers, and by using data to create better insights and underwriting strategies.
3. Partnership building
FIs need to design and clearly communicate rules of engagement. What types of partnerships — long-term, investments, VC funding, contractual, alliances — will they engage in? How will they manage risk, share rewards, and foster creativity and innovation?
4. Regulatory compliance
New regulations may give some FIs the opportunity to unlock additional value, although the opportunities will vary greatly depending on the jurisdiction. Some FIs are restricted to offering services only within their charters, and some nonbanks are restricted from providing banking services.
5. Talent recruitment
Ecosystems and the changing nature of work mean FIs need a plan for acquiring and training digital talent with the right skill set to work with multiple partners. To attract digital talent and help them thrive, FIs should strive to create a more entrepreneurial culture and agile working environment.
Moving toward a new marketplace-based economy
If ecosystems were strictly industry-specific, their value to FIs would be constrained. But, as sector lines blur, the potential for FIs to become core to the future digital marketplace, and to their customers’ lives, is almost limitless. Converging cross-industry ecosystems are currently being developed in many markets, leveraging services from different industries to provide end-to-end value propositions to consumers and corporations. An example of this development is the e-mobility ecosystem, which integrates services from automotive, car sharing, charging, rental cars, travel, public transport and parking into a full-service value chain, covering all needs of a private or business traveller as well as a frequent commuter. Similar examples can be found in the smart city, smart home, digital health or internet of things (IoT) environment.
With the right APIs, banks and insurers can plug themselves into these ecosystems and value chains. In fact, at EY, we expect that the financial marketplaces embedded in other industries’ ecosystems will become significant sales channels for financial services providers. The more standardized the products (e.g., mortgages, payments, consumer loans, savings, property and casualty insurance), the less likely that existing one-to-one client relationships will continue. On the other hand, consuming other organizations’ APIs will give FIs a much broader view of their clients’ needs and risks embedded in the customer relationship.
An organization’s ability to participate fully in tomorrow’s ecosystems depends on embracing a proactive API strategy today — or risk losing relevance as competitors do. This is not a “technology” issue but a board priority. Already, as our research shows, leading banks are moving fast to facilitate and foster the API innovation that will enable participation in the ecosystems that will create long-term value. For those FIs that are yet to set their ecosystem strategy, the time to do so is now.