How APIs are Changing the FinTech Narrative09.15.2015
Philip Brittan, Chief Technology Officer & Global Head of Platform, Thomson Reuters
Nowadays, when people look at innovation in the financial technology industry they tend to view it as a competition between big and small. You tend either to read the story of the giant firm dominating the tech space by pushing out smaller players, or the story of the small upstart taking on the big guys. However, both these narratives miss the fact that today’s reality in the fintech space is much more subtle and nuanced. There is a whole ecosystem for innovation in the industry where firms, both large and small, work together. It is an ecosystem that is responding to the deep needs of clients, financial professionals and developers alike – and it’s inherently open. This beating heart of fintech innovation is all powered by the Application Programming Interface (API).
An API is the infrastructure that developers use to build applications to access content and other services. In the 21st century, they define how individuals communicate with each other and, by extension, do business. In the past, APIs remained closed in order to provide exclusive benefits to those who knew how to use them. Specifically, large firms could build up valuable data sets which only a select few could access directly. However, as the market became increasingly complex and uncertainty brewed amongst its players, many organizations were forced to re-evaluate their strategies. In today’s world, what makes products and services competitive are the ways in which they remain adaptable, flexible and resourceful. With the realization that closed APIs can only get firms so far, the capabilities of an open API become apparent.
Taking an open approach to software development, and specifically APIs, enables more innovation than if the infrastructure were closed. APIs serve as the platform for developers to build on, so making them open enables more people to produce more innovations than they would if they worked alone or from scratch. Traditionally, APIs were treated like a secret handshake – only individuals privy to the information knew how the API worked and what its benefits were. But APIs are now becoming simpler and more flexible – and more open. This openness is the white space where innovation is happening in today’s fintech industry, because it allows firms of all sizes and developers with different levels of knowledge to work together to create new products and services.
The demand for tools that enable collaboration and empower industry participants is greater than ever before. Businesses are realizing that focus needs to be given to innovation in order to evolve services and remain competitive. Yet lack of resources (time, money and manpower) prevents many firms from solely focusing on this, and remains the largest barrier for breaking into the competitive landscape. Already established APIs provide a solution to this problem, as they are a platform where new, business-specific applications can be created that use the plethora of data and content that is already found within that API infrastructure. Simply put, an established firm opening up its API can help start-ups and other firms seize opportunities that they otherwise would not have access to. This access does not just stop at content though.
Having an open API permits multiple firms to work together, allowing far closer collaboration. In the past, taking data and making it available across a range of content sets used to be very difficult. An open API structure allows both clients and developers to build on top of the API and make applications that suit their specific business needs. An open API provides a common platform for all of its users, except it has the breadth and depth of content needed to create original software that third parties can then use to build on even more. It can even help foster a sense of community throughout the industry, increasing long-term value for every participant.
This open approach to API technology is driving change within the fintech industry. As the structure of an API provides an ideal platform for innovation, and making it open can increase the opportunities for innovation for all parties involved, it seems a natural progression for the industry. This ecosystem, where firms can work together, opens up opportunities that neither big firms nor small would see without the other. So we should be saying goodbye to the David and Goliath narrative of giant firm vs. small firm, and moving on to a tale of the Little FinTech Firm That Could. And really, if businesses continue to evolve and innovation continues to propel the industry forward, what is so wrong about that?
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