New Business Models in Banking: How to Innovate through APIs?

Throughout my 11 years of experience in the field of solutions architecture, I have been able to witness two phenomena that have transformed the financial landscape. One is a constant evolution, and the other is the consolidation of new business models in the industry.

These changes have posed significant challenges for financial institutions, requiring them to provide renewed digital experiences that put their customers at the center of their strategy. This strategic reorientation improves the retention of existing customers and drives the efficient acquisition of new users.

Below, we will see what actions we can take to prepare our way toward new business models in the financial industry, particularly considering innovation through APIs.

Open to Innovation through APIs

APIs are emerging as the technological backbone that enables financial institutions to adopt new business approaches and create flexible ecosystems. 

These application programming interfaces facilitate integration between internal systems and become an effective way to connect with third parties, business partners, and fintech startups. As a result, we have a significant opportunity to build innovative products that allow us to scale our business to enter the daily lives of end users. 

Davivienda: An Example of Transformation through the API Economy

Let us take the case of Banco Davivienda in Colombia. Since 2019, this institution has embraced new business models such as "Bank a Service" by creating APIs. Through these assets, the bank was able to enter into partnerships with companies that sell Apple products, allowing them to provide customers with credit cards in physical stores within minutes. 

Additionally, the bank expanded its capabilities to allow users to pay for public transportation and other services with their credit cards. This illustrates how an API-centric approach can quickly transform traditional services and bring new opportunities.

Three Mainstays of Transformation in Banking

The evolution of the financial industry toward more open, customer-focused business models is supported by three mainstays:

• Digital Economies: Open data and industry collaboration allow companies to create more holistic and personalized views of their customers. This transforms the relationship between banks and their customers, moving from a closed perspective to a customer-centric vision.

• Evolution of the Regulatory Framework: Regulatory changes, such as Open Banking, drive the openness of financial data and create a more competitive environment. Financial institutions must adapt to these regulations and take advantage of them to create new opportunities.

• Technology as an Enabler: APIs and other integration technologies, such as microservices and API management, allow financial institutions to build flexible and scalable ecosystems that quickly adapt to changing market and customer demands.

In this scenario, we must ask ourselves: What can a bank do to make the most of the API economy? The answer to this question is building a solid integration architecture and governance. 

This involves defining an API development, execution, and management platform that allows agile collaboration between technical and business teams. Agility and constant iteration are critical to quickly launching new products and services into the market.

Focusing on solutions and not unnecessarily increasing technical complexity is also crucial. Remember that not all new technologies should be applied to each case. 

Assessing the organization's maturity level and specific needs is essential to defining the appropriate set of technologies and tools. 
In all these processes, adopting an agile approach and creating Minimum Viable Products (MVPs) allows us to validate the premises before investing in more complex solutions.

Toward an Innovative Future

APIs are the bridge that connects changing customer needs, evolving regulations, and constantly developing technological capabilities. Financial institutions must leverage these tools to create innovation ecosystems that respond to current challenges and are ready to embrace future changes. Staying at the forefront of the financial industry means anticipating changes and taking advantage of emerging opportunities. APIs are the key to achieving this.

This text was based on the 5B Business Day conference in Guatemala. Relive the full presentation here:

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