Oct 25, 2019
Open API (Application Programming Interface) is a relatively novel concept in Asia-Pacific, with banking being the only industry to have adopted it to significant — albeit varying — degrees in different countries across the region.
While a number of companies have taken advantage of open APIs’ ability to help build and integrate application software, overall adoption rates remain low.
INTRODUCTION AND IMPLEMENTATION
Open APIs typically allow products and services to communicate with one another while maintaining a significant degree of privacy around their implementation methods.
This in turn allows for more simplified app development on a more economical budget and shorter timeline. Furthermore, open APIs’ propensity for simplified design, administration and usage mean greater flexibility in designing new tools and products, as well as more opportunities for innovation.
Across industries, open APIs’ simplification of how developers integrate new application components into existing architecture also aid collaboration between businesses and IT teams, allowing companies to remain competitive amid constantly changing digital markets were a single new app can transform an entire industry. One such example is cloud-native app development, which helps to speed up development. Through this channel, APIs can offer individual organisations a simplified method of infrastructure connection, but also allow them to share their data with customers and other external users. Open APIs in particular present unique business value as they are able to not only simplify as well as expand how businesses connect with partners, but also open up greater opportunities for monetising their data (such as in the case of Google Maps).
BANKING ON INNOVATION
Nowhere is open API implementation more prevalent than in the banking industry, where open banking has become a key topic of conversation in recent years. Last July, the Hong Kong Monetary Authority (HKMA) introduced the four-phase Open API Framework for the country’s banking sector, as part of its plan to facilitate more widespread development and adoption of APIs in banking.
Phase I launched in January this year, with 20 retail banks participating. Since then, the banks have made over 500 open APIs available, making information on a variety of banking products and services more accessible.
In addition, a rising number of website sand mobile apps are using these open APIs to provide services that include loan product comparisons and information on foreign exchange rates.
These participants are on track to launch Phase II by end-October this year to process applications for their products and services.
In Australia, the Federal Government also announced in 2018 its goal of implementing an Open Banking Regime that promises to provide customers with greater convenience and control in managing their finances.
Phase I launched in July this year, whereby all major banks were required to make generic data on Phase I products available. Phase II, which will see the availability of customer data on its products made mandatory, is set to follow in February 2020, followed by Phase III in July 2020.
Last year, the Bank of China launched its digital development programme and as of late last year, had 145 million phone banking customers.
In addition, the bank has said the international version of its mobile app is being used in 18 countries. This programme followed previous open platforms pioneered by the bank, such as networks for online travel agencies Tuniu and Qunar, and Tencent’s WeChat.
IMPEDIMENTS TO IMPLEMENTATION
Expectedly, two of the main barriers to open API adoption are a general lack of knowledge as to how it works, and concerns regarding the vulnerability of third-party apps in terms of security.
Granting third-party developers access to a company’s API also means increasing the risk of cyber crimes, especially due to the intrinsic weaknesses in APIs that transfer data and communicate with back-end systems. Other factors, such as constant Internet exposure and insecure web browsers, tend to make APIs and UIs vulnerable to attack.
In addition, the issue of maintenance may also give companies pause when it comes to open API implementation. Being a publicly available interface, issues such as lapses in vendor services in open APIs require doubly urgent attention. This is especially applicable if a company has multiple moving parts handled by multiple vendors within its services — all it takes is for one vendor to malfunction to
throw a wrench in the entire system. Such scenarios necessitate an extensive degree of maintenance, for which a larger amount of specialized manpower is required, hence resulting in higher costs for the company. Even in banking, many organisations remain hesitant to implement open APIs, due to a tendency to view them as a necessity for regulatory compliance instead of a growth opportunity. According to the World Payments Report 2019 by Global Banking & Finance Review, fewer than half (48%) of the report’s survey respondents said they intended to use open APIs beyond the level needed for regulatory compliance. At the same time, 60% of the banks surveyed revealed that most of their digital transformation efforts had been implemented as a response to regulatory compliance, with a majority having no intention to adopt APIs that expose data in areas such as branch or ATM locations (67%), intra-bank statements and conditional payments (53% respectively). The great variance in guidelines for building websites and apps also act as a deterrent to open API adoption in banking despite the existence of standards specifically for open banking, which apply to both banks and third parties.
This can be attributed to the standards not being sufficiently detailed in determining how APIs should be written and how they should appear. As a result, fintech developers have to create different keys for different services, banks and markets, hindering rapid innovation and slowing down development.
IMPLICATIONS FOR THE FUTURE
Despite the aforementioned challenges, however, the number of organisations adopting open APIs across Asia — including those outside the banking sector — has been slowly but steadily growing.In 2017, Singapore’s Government Technology Agency (GovTech) and Ministry of Finance (MoF) launched APEX, a centralised API exchange to facilitate inter-agency data sharing with a higher level of security amid greater ease of use. APEX, which functions as a centralised data-sharing channel for government agencies, uses self-service design that allows agencies to obtain data from other one another using pre-configured access controls dictated by the source of the data.
Government agencies using the platform — which has been available across the public sector since mid-2017 — can also review web analytics and run competitions without having to develop their own crowdsourcing websites, and the APIs published on APEX are reusable for analytics, or integration with other apps. In the same year, AXA Insurance became Asia’s first insurer to introduce end-to-end transactional APIs to offer customers personalised risk management services as part of its digital ecosystem’s value chain.
These APIs can be integrated into any website, application or digital channel to provide real-time insurance coverage to customers, and extends to other branches of the firm’s business, including customer and policy services.
Other companies that have made use of open APIs to ramp up their customer service offerings include SIA, Grab, SingTel and Axiata Digital.
Singapore has been touted as a market leader in APAC when it comes to open API innovation, especially when it comes to open banking. Already, the Monetary Authority of Singapore (MAS) has encouraged more extensiveexperimentation on open APIs for financial services and fintech throughout ASEAN.
This could result in a more unified industry approach that is likely to aid banks in the areas of innovation and integration, stemming from open API standardisation that will allow a developer to create just one application for use across different organisations.
The future of business is now digital. As organisations work on strengthening digital capabilities and building digital ecosystems for the next generation of consumers, open APIs are proving to be innovative and agile in resolving complex legacy IT transformation. Hence, APIs enable organisations to scale, foster innovation, build cross-industry partnerships and reach more customers for a greater market share in the digital economy.
Join us at the inaugural Open APIs Innovation Asia 2020 summit to learn how you can embark on an API-led business transformation strategy to unlock customer and business value – from API integration, design, framework and standards to practical case studies highlighting the use of APIs to enhance business processes, CX, product and more.
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