At October’s BAI Beacon conference, I spoke on how application programming interfaces (or APIs) provide a critical engine for changing financial services. These technology protocols allow diverse software components and different companies from different sectors to communicate, and in that session I laid out a three-step road-map for API adoption by banks.
The premise of the talk was also laid out in a BAI article that ran under the bubbly title Amazing Potential Innovations. In that piece I noted that much remains at stake—and it’s not just about providing easy access to the services we provide. While business models and technology will evolve and mature, we really should think about how APIs can transform the end-to-end customer experience. API solutions mitigate the risk of banks being taken out of the equation, or made obsolete.
So I outlined a three step road-map as follows:
- Open access: Provide APIs to make our services and products available when and where needed. This can definitely boost top line growth and help retention.
- Originate transactions: Get in the middle of customer experiences to trigger transactions that otherwise would be triggered elsewhere. For example, improve the use of features such as card linked offers, while developing wish lists and providing better tools for personal financial management and the like.
- Connect experiences, create value: Focus on the higher purpose of improving financial well-being and orchestrate between the many banking and non-banking services customers use—including bill pay, personal financial management, investments, retailer loyalty programs and goal setting. Guide, advise and ultimately help customers meet financial goals.
While I based this on what's actually happening in banking, I presented the three-step model as a sequential roadmap where significant technology investments mark the first step. Just as many others have done, I outlined a “technology first” path.
But as I spoke to more attendees, they expressed the same underlying concern again and again:
"To adopt this journey, are these significant technology investments and upgrades the mandatory first step?"
The concern was legitimate. Many of the folks expressing it relied heavily on legacy systems that have been built over decades. And as I thought about it, I came to the conclusion that technology and legacy upgrades were perhaps the wrong first priority. They were very important, but banks could still do many other things to make a strong impact on their customer engagement journey. A nice related read on this topic is in a BAI article titled Think Simple for Digital Transformation.
The more I thought about it, the more this made sense. So I refashioned the API adoption roadmap model into the banking equivalent of a Rubik's cube—which means that various items spread across the three roadmap steps of the roadmap can be adopted in ways that suit a specific financial institution’s needs. All we need is a clear idea of the goals we outline.
Here's my rationale:
- Opening additional channels for acquisition is important, but channels themselves don't drive customer engagement. In the new connected world, leading with channels for transactions represents the old way of doing business. In fact, by building non-technology intensive tools that engage customers and build context, we might far exceed the gains from a new channel. For example, it's great to have a button on a retailer’s website allowing your customers to query and apply for credit. But when we lead the customers to the retailer with the credit already applied for (or analyzed), we create even more impact.
- A simple analysis of customer needs will often suggest that banks must stand in the middle of their customers’ ecosystems. They should address complete customer journeys--not just those parts where a banking transaction needs to occur. Common use cases where banks can play a larger role include product warranties, personal financial management, peer payments, optimizing the use of various loyalty cards from various industries, asset ownership, and risk management. There need not be a heavy play for "legacy" concerns here. Instead, these gaps in customer experience can be filled through well thought-out partnerships, new digital tools, and of course, any required technology investments. But banks should focus first on identifying the right customer journeys and selecting investments that provide higher value and meaningful differentiation. That's where the power of FinTech innovation can be nicely leveraged.
- Two critical, connected promises of banks—contributions to community and creating sense of belonging—have increasingly lost meaning for customers. However, it doesn't take heavy technology investment to be integral to the community and showcase that engagement. It ties back to building both context and a win-win for all customers. Our customers are both businesses and consumers, and interact in the community. How can we make those interactions more valuable and streamlined, while inserting ourselves in the middle? After all, the new economy is driven by brokers: Amazon, Facebook, Apple, PayPal, Airbnb and Uber to name a few. It doesn't take a full transformation of legacy systems to improve local context for customers, and be a hub of activity. The BAI article Reexamining the Branch of The Future presents some ideas on fashioning the branch as a community hub.
- Finally, by experimenting rapidly with new tools of customer engagement we can provide new, improved business requirements to our service and product providers instead of relying on them to innovate and produce shiny new cookie-cutter capabilities. As we return the focus to customer experience and engagement, the right requirements for technology evolution will emerge. In turn, that will suggest the right innovations to apply, and in turn yield meaningful differentiation and customer engagement.
The three-step model is of course still relevant—but a Rubik's cube perhaps offers a better representation. While rapid progress must still be made on technology transformation and next generation delivery models, much can be done in parallel to foster true customer engagement and community relationships.
Meanwhile, we can avoid putting the cart before the horse. Choose and apply the features laid out in the three-step API model with a singular focus on creating stronger and meaningful customer engagement. Following the Rubik's cube approach will hopefully solve that puzzle, with all the pieces falling into place.
A strategist, marketer, manager and consultant based in the New York City area, Manish Grover is the author of “Dancing the Digital Tune: The 5 Principles of Competing in a Digital World.”