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Open banking and APIs are at the heart of the digital finance revolution. Monitoring APIs helps protect banks from issues including failures and slow-downs
Technological innovation is disrupting the financial industry. In the last couple of years, many fintech banks and digital finance startups have emerged. These new firms, like Simple, Chime, Varo, and Moven, claim to offer consumers more choice, better service, and lower costs. Meanwhile, global giants like PayPal and Amazon are exploring offering select banking features. Nonetheless, many of the big players in fintech are also transforming digitally.
Application Programming Interfaces (APIs) are at the heart of the digital finance revolution, along with the shift towards open banking around the world, meaning that banks are increasingly giving third parties access to their financial data. First developed in the UK, open banking has since spread to the EU, directly stimulated by regulatory initiatives. These include the Second Payment Service Directive (PSD2), which compels banks to provide their customer data to third party providers (TPPs) through open APIs.
PricewaterhouseCoopers predicts that the US will be the next market where open banking will hit (the different regulations that US incumbents operate under has been making open banking adoption slower). PwC cautions that this shift comes with major cyber risk due to the expansion of the attack perimeter for financial institutions. PwC argues that when open banking is facilitated through open APIs, however, it is significantly safer, and recommends, along with other safety procedures, that financial institutions and their partner TPPs in the US use APIs for open banking.
There are significant advantages to open banking for both fintech and established legacy banks. For legacy banks, as Business Insider points out, they are able to “leverage open banking to partner with fintech and TPPs instead [of competing], and thereby remain competitive in the rapidly evolving industry.” For fintech (also known as the challengers), open banking is a critical factor in propelling them forwards. Openness is an essential enabler of the development of new apps and services, which essentially gives them their raison d’etre. The main goal, from the point of view of the challenger banks, is to give account holders a greater degree of options. More options enable a new level of customization, improving customer experience and a digital, mobile-first approach.
Previously largely sidelined to retail banking, APIs are beginning to be viewed by the wider financial sector as an essential part of the journey towards an agile use of web technology both internally and externally.
APIs can act as a key driver of flexibility and extensibility for digital finance, offering various benefits:
Indeed, APIs are at the center of most fintech apps. Rapyd, for instance, a new fintech-as-a-service startup backed by the payments giant Stripe, is constructing “a Swiss army knife of financial services,” including payments, currency transfers, ID verifications, and card issuing for companies to use all, according to TechCrunch, “by way of a single API.” Stripe itself is a suite of payment APIs that powers commerce for enterprise via transactions such as collecting sensitive card data, tokenizing customer information and accepting payments with browser payment APIs, such as Apple Pay, Google Pay, Microsoft Pay and the Payment Request API.
In recent years, commercial banks have also started to move APIs to the heart of their digital strategy, such as Capital One’s DevExchange developer portal, a banking, capabilities-based API platform, which gives developers the opportunity to add Capital One’s APIs to their own platforms. The bank’s vision for DevExchange is to offer “powerful APIs that go beyond banking”, offering additional use cases to traditional banking transactions, so that its services include an array of options, such the ability to request historical transactions or participate in reward redemptions.
In 2018, the Spanish bank BBVA launched its BaaS platform, Open Platform, in the US, making eight of its APIs commercially available. This enables third parties to build new products and services for customers and clients by accessing and integrating banking data of the customer (with their permission) into their applications. In opening up APIs in this way, BBVA became one of the world’s first major banks to deliver open banking. According to Derek White, Global Head of Customer Solutions at BBVA, “This is a customer-led business opportunity.”
Monitoring APIs, however, is critical as there are various things that can go wrong, from issues around dysfunctional integration to problems with data processing causing an application to slow down to an app potentially failing entirely.
Moreover, as APIs are increasingly used to power complex integrations and frequently involve the use of multiple service providers, if there is a bug or error at any level, it can impact the entire workflow. One error has the potential to bring all business transactions to a complete halt. API performance monitoring, therefore, needs to track each step of a transaction’s lifecycle and enable end-to-end visibility into API transactions.
As momentum for open banking grows, API monitoring is ever more essential for the finance sector. As we’ve seen, APIs are the central digital enabler of the open banking movement, powering a host of new transaction types and creating a communication channel between financial service providers, hence their running smoothly is a necessity.
Constant performance monitoring of APIs can:
Catchpoint’s wide range of monitoring options include API monitoring, allowing you to proactively monitor API endpoint availability, performance, reliability, and reachability. You can then hold to account API management providers when necessary.
A recent experience by one of our retail customers demonstrated the singular importance of API monitoring when they experienced an outage in Australia. This outage stalled website search functionality for over two hours. Through Catchpoint’s API monitors, the customer quickly unearthed the cause, significantly reducing MTTR.
Catchpoint API Monitoring helps you evaluate end-user experience based on the API performance and ensure that the API integration on your site is functional and available to users from any part of the globe. Download the API Monitoring eBook to learn more.