I’ve heard many banking IT staff declare definitively “we’re not exposing an API to the public.” I get it. It’s scary to create yet another point of entry, a potential vulnerability to the organization. Better to just lock it up tight. Throw away the key. In fact, to maximize security, we should probably just turn off all the computers.
Do it or be Disrupted
There was a bit of consternation over Uber’s latest valuation. There’s a simple explanation for the high valuation. It’s not about the market for taxi rides. It’s about the platform:
- “It’s interesting to think of Uber as the new Amazon. Amazon is a platform company, not a books company (and arguably not a retailer).” – Benedict Evans on Twitter
Last week, Uber launched its API. I was surprised at how obvious it sounded but more surprised when a number of apps on my phone updated to add Uber reservation functionality. It was a very nice launch. Uber is now where I am: If I’m flying United, there’s Uber. If I’m making a reservation at OpenTable, there’s Uber.
The Power of an API
That’s an API impacting channel distribution. That’s also an API impacting brand power, demonstrating the real power of the application economy. Uber isn’t waiting for the customer to remember to open the Uber app; it’s in the app the customer is using at the moment they need Uber’s service. It’s beautiful.
Getting Banks to Think Like Software Companies
The key thing to remember is that someone will figure it out in financial services. If the banks don’t figure out how to create a financial services platform, someone else will. The banks realize they’re competing with Silicon Valley and believe they’re ready. Perhaps they are, from a technical-chops perspective. But from a perspective perspective, banks are not yet thinking like software companies.
The Business Case for Exposing a Loyalty Point API
Banks have the same drivers Uber does. (Hah! Going to leave that pun there.) The API is just a technology – just an interface implementation for integration. Banks are already doing external integration. My favorite example is the ability to pay with Chase Rewards points while shopping at Amazon.
It’s so easy to imagine Benedict Evans’ quote above tweaked to explain my point:
- “It’s interesting to think of Chase as the new Amazon. Chase is a platform company, not a bank (and arguably not a financial services company).”
I can pay for my Amazon purchase with Chase rewards points. This has a clear business benefit, if I can be so crass as to summarize it simply:
- More opportunities to pay with points are more opportunities to take the points off the balance sheet
- The more points can be used, the more valuable they become and the more people care about the benefit
- If an API is done properly it becomes much easier to use than the current architecture for external integration, which means the ROI for enabling smaller players becomes achievable thereby creating a virtuous cycle of more points off the books, more value to the points, more customers who care about the program
- And with broad and visible distribution, there’s a Big Data play for analyzing shopper value and tweaking the point-dollar relationship to reduce the reward program’s costs
Why have they limited this to Amazon? (Rhetorical question. I imagine it’s because the non-API integration strategy takes a lot of effort and so doesn’t scale unless it’s with someone big like Amazon. Though I don’t know for certain.) Imagine if everywhere you could book an Uber, you could also pay with Chase Rewards points?
Interested in learning more about how financial services organizations can differentiate, extend reach and establish trust using APIs and mobile technology? Join me on September 25 for the webinar Adapting to Digital Change: Use APIs to Delight Customers & Win.