In their recent report, “Cutting through the noise around financial technology”, McKinsey & Company states:
“In the same way that Apple did not seek to rebuild telco infrastructure from scratch but instead intelligently leveraged what already existed, successful fintech attackers will find ways to partner with banks—for example, by acquiring underbanked customers that banks cannot serve, or acquiring small-business customers with a software-as-a-service offering to run the business overall while a bank partner supplies the credit”.
There are various parts of a new technical application that make sense to house internally. Equally, there are many parts of applications that do not need to be re-invented or re-done. The latter you would typically source from specialist vendors and integrated. Traditionally, integration could be a costly, complicated and risky undertaking where countless of hours would be spent on lining up data models, integrating process flows and synchronizing software frameworks. There are also countless of examples of flawed or failed integrations, where the simplicity of a ‘one stop shop’ concept ends up serving no one.
The API Economy represents the efficient picking of specialist parts for your application and doing so in a manner that doesn’t cost two years of your teams life, but rather allows the creation of new solutions where the sum is more valuable than its parts. At the end of the day, the purpose of your specific application will be to provide a tailored service that you are the best at providing. In order to achieve that aim, you might utilize specialist components in your value chain and integrate them into your product via swift APIs.
Building on top of an API gives you the benefit of leveraging many components, while retaining the control of your end user contact point and user experience. The Crowd Valley Digital Back Office and its API is a good example of how the sum of the parts are more valuable than the parts themselves. By being able to interact with only one software stack, the client side application can draw on financial back office functions such as payments, custodian solutions, clearing, to compliance functions such as KYC/AML checks, bad actor checks to the complexities of transaction handling, audit logs, secondary market work flows etc.
The API Economy is fundamentally a philosophy, of how to build new applications in the modern age. It signifies the end of multi year software projects and encourages an iterative and market responsive age in application development. In the financial services context this philosophy is partly alien, but that simply highlights the opportunity presented for institutions. By taking the leap and joining the API economy, together as an industry we can get away from the ancient COBOL code in existing financial services back offices that keeps executives up at night.
Internationally awarded digital finance entrepreneur, active in pioneering new securities models worldwide. Has worked in digital finance since 2009, recruited over 100 individuals, built up a operations on six continents and been recognized as one of the top 100 thought leaders in crowdfunding. Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide - including the SEC, the European Commission and Italian regulator CONSOB - for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for digital finance. Markus has studied computer science and economics (M.Sc).