Can APIs Help Banks Avoid Becoming Simple ‘Deposit-Holders?’
EXCLUSIVE—If banks want to remain a large, foundational part of the future financial system, they’re going to have to start working a bit harder on the open banking ecosystem, Marten Nelson, co-founder and VP of marketing for Token, told Bank Innovation.
“Banks have to play on both sides as well, they do need to develop applications and services themselves as well as with partnership,” Nelson told Bank Innovation. Banks, Nelson said, need to take advantage of their reams of data to actively take advantage of open banking, as opposed to simply complying with incoming regulations like PSD2 and other innovation efforts on the parts of governments.
This is especially true as more and more startups, younger fintechs, and most importantly, larger tech companies all try their hand at providing financial services, with mobile capabilities, APIs, artificial intelligence, and other technologies on their platforms.
“The fear for banks is that they’ll just become deposit-holders,” Nelson said about the effect of these companies on the banking ecosystem.
Nelson’s comments echo others in the industry, who note that companies like Alibaba and Amazon should worry financial institutions more than other banks, especially if they continue to focus on the wrong aspects of APIs’ potential.
Banks have two main advantages when it comes to outpacing these tech giants, said Nelson: data (which is losing ground fast as an advantage for banks in this area, as companies like Amazon and Facebook continue to collect, and more importantly, use it), and history with customers.
“Largely, their customers trust them,” Nelson said of banks. “A banking customer trusts their bank with their data more than they trust Facebook.”
Whether consumers will continue to do so as tech platforms continue to open their data and services at a quicker pace than banks is the question.
Begun in 2015, Token’s goal is to develop a platform for banks, businesses, and other companies to better facilitate finance, using APIs already in compliance with PSD2 and open banking initiatives.
