API Economy in Banking

Even though (many) banks have seen #openbanking as an unnecessary and costly regulatory burden, the truth is that they would have to invent it had it not existed – to rephrase Voltaire. Let’s take a look. Open banking brings a mentality change: from a traditional, vertically integrated, static set-up to a dynamic environment where APIs offer ubiquitous, easy and straightforward connectivity among incumbent and challenger players alike. For banks it is their best chance in decades to transform by leveraging the enormous potential of the API #economy. Despite the different approaches, open banking is about facilitating #innovation by democratizing the flow of #data. But it's not a business model in itself. It does, however, facilitate the introduction of new, revolutionary concepts, which change how financial services are delivered and consumed. The most impactful new business models are what we call Banking as a Platform (BaaP) and Banking as a Service (BaaS). Even though they are sometimes confused, they are not quite the same, but they are the two (different) sides of the same coin. Let me explain: - Banking as a Platform: the bank is actually the platform and owns the delivery channel, however it does not (necessarily) own all the services but rather aggregates them (via APIs) from third parties (i.e. fintech players). The model could be relevant for larger and smaller banks alike: larger players that have the resources and the customer base to build an ecosystem around them or small challengers that want to grow and cannot afford to develop any of the offerings in-house. - Banking as a Service: the bank takes a back-seat role and provides the infrastructure (technical platform, licensing or additional services), so that client-facing partners can do the customer acquisition. Essentially BaaS is what sits behind the huge transformation of embedded #finance. You can think of BaaS as the bottom layer, the enabler behind embedded finance, which, in turn, refers to the outcome and is normally to be found one (or more) layers above BaaS. What is not yet fully understood is that the BaaS model creates opportunities not only across the entire value chain but also for very different banking players, i.e. from Goldman Sachs sitting behind Stripe Treasury and Apple Card to smaller banks without innovation expertise. Although it might sound controversial, banks today are not in lack of choice. On the contrary, their spectrum of choice as to what they might become is the richest they ever had. But it depends on 3 factors: 1) their willingness to adjust 2) having the right strategy in place and 3) (above all) execution. Look at each one separately and none seems beyond reach. Put them together and they become tricky, however it is the combination that will set apart winners from losers for years to come. Opinions: my own, Graphic source: Kapronasia, Embedded Finance Future in Asia

Overdue Open Banking post (#EmFi has been using all my 🧠 power recently!) What’s happening in the US right now deserves a spotlight. JPMorganChase has introduced a steep rate card for accessing customer data via API. It’s a direct attempt to squeeze fintechs and their customers. 🔷️ Context 🔷️ The Trump administration is working to roll back the Open Banking rule implemented by the CFPB. Not because they’re ideologically opposed to Open Banking, but because they want to reduce the size of the agency. While banks are suing it they can't reduce the headcount. They've indicated they’ll “do it better” eventually. 🔴 Impact 🔴 Fintechs and Open Banking platforms will face significantly higher costs to access consumer-permissioned data. This isn't theoetical. The cost of a new loan from an alternative lenders will go up. Pay-by-Bank payments will cost merchants more meaning less money to invest. Will budgeting apps survive? 🟤 JPM's Logic 🟤 Data is costly to maintain, secure, and serve. If others are going to monetise it, they should pay. But this justification is thin cover for a broader goal: restrict the portability of banking data so that it’s harder for competitors to serve customers or reduce payment costs. ⚠️Why is this problematic? ⚠️ Three reasons: 1️⃣ Data belongs to the customer. Your transaction history is yours. If you want to share it with a third party, you should be able to. The institution is merely a steward of your information. 2️⃣ Access to data drives competition. Fintechs rely on real-time data to underwrite loans, manage risk, and provide tailored services. Making that harder raises barriers to entry and reduces market efficiency and ultimately growth. 3️⃣ Raising API prices makes screen scraping more attractive. That’s bad. It’s insecure, unregulated, and less transparent. Ironically, the very thing Open Banking was meant to improve is being undermined by misaligned incentives. 🔭 The Big Picture 🔭 Large banks are protected by implicit government guarantees. They're essential to the system and so regulated accordingly. But that safety net also reduces pressure to innovate. Instead of building better products, they raise prices and resist change. That’s why Open Banking matters. It levels the playing field. It introduces real competition. And it ensures that innovation in financial services doesn’t come solely from protected incumbents. If the US rolls back #OpenBanking, the result is clear: consumers and businesses lose out, #GDP is lower than it could be, and innovation slows down. That’s why this isn’t just a technical debate. It’s an economic one. (Views my own, not those of any current or former employer.) #payments #openfinance #innovation #OpenEconomyConsulting

Banking infrastructure is entering a new phase where software no longer waits for instructions. The architecture described here around “Agentic Banking” points toward financial systems built for autonomous execution, where AI agents can reason, access tools, trigger workflows, monitor infrastructure, and operate across banking environments in real time. That changes the role of banking infrastructure itself. Core banking systems were originally designed around human-operated workflows and rigid procedural logic. But autonomous systems require something very different: API discoverability, real-time contextual data, continuous orchestration, and operational resilience that can react without waiting for manual intervention. One of the more important points in this piece is that agentic banking is not a standalone AI deployment problem. It becomes a full-stack engineering problem involving: • real-time data pipelines • cloud-native core modernization • AI-optimized compute infrastructure • autonomous AIOps and resilience layers • domain-specific model fine-tuning • token cost optimization • hybrid on-prem and cloud architectures Huawei also outlines some of the infrastructure requirements behind this transition, including AI-powered modernization with over 90% mainframe code transpilation adoption rates, architectures designed to support 10-fold traffic surges, and autonomous resilience systems targeting 99.999% availability. The operational implications are massive. An AI agent handling onboarding, treasury operations, fraud monitoring, customer servicing, or payment orchestration cannot operate on stale batch data or fragmented infrastructure. The system architecture itself starts becoming part of the intelligence layer. This is also where many banks may underestimate the scale of transformation required. Adding AI copilots on top of legacy systems is very different from building production-grade autonomous financial operations capable of executing actions safely across multiple systems in real time. Another interesting part of the article is Huawei’s focus on computing engineering, model engineering, and agentic engineering as separate operational disciplines, alongside its RONGHAI Global Partner Ecosystem strategy that connects infrastructure providers, ISVs, and system integrators to accelerate deployment across banking environments. The next generation of banking infrastructure will likely be shaped by institutions that can combine real-time orchestration, unified data foundations, resilient infrastructure, and specialized financial AI models into one operational stack. That may become one of the biggest competitive advantages in financial services over the next decade. Read the full article in the comments

I have always said that partnerships are catalysts for transformation in Financial Services. This week’s announcement that Fifth Third Bank is partnering with Brex to power its commercial card program is more than just a fintech headline—it’s a signal of how financial institutions can accelerate innovation by leveraging external partners to upgrade their API and technology suite. Rather than building everything in-house, Fifth Third is embedding Brex’s API-driven payments infrastructure and AI-native finance tools directly into its offering. This move underscores a critical truth: banks don’t need to reinvent the wheel to deliver cutting-edge digital experiences. By partnering with fintechs that specialize in APIs, automation, and AI, institutions can: · Modernize faster without the burden of legacy tech debt · Scale intelligently by integrating best-in-class solutions · Stay competitive in a landscape where clients expect seamless, real-time financial management The Brex–Fifth Third collaboration is a blueprint for how incumbents can remain relevant: embrace embedded finance, adopt API-first architectures, and lean into partnerships that unlock speed and innovation. As financial services continue to evolve, the winners will be those who recognize that partnership is not a concession—it’s a strategy.

The payments infrastructure underpinning global treasury is being rebuilt—and it will fundamentally change how businesses of all sizes operate. For years, Treasury teams have managed fragmented ecosystems and multiple payment processes running in parallel. It worked, but those systems weren’t designed for today’s on-demand, borderless world. Today, streamlined workflows that enable intelligent cash movement are the difference-makers. CFOs and treasurers need technology that supports an “always-on” model—enabling near-real-time execution where available, across borders and currencies, around the clock. Our clients are leaning into a digital-first treasury approach characterized by three factors: 1. Richer payment data with more structured fields and remittance detail 2. A single connectivity layer, with APIs bridging payment types, regions, and rails through one integration 3. AI elevating efficiency, intelligence, and decision-making As ISO 20022 and richer data standards become a key enabler of cross-border payments, they create the foundation for these factors to drive impact. When banking systems connect directly to a company’s ERP or TMS through a single API layer, a live, unified view of the financial position becomes accessible. This allows for real-time forecasting, speeds up processing, and reduces fraud. AI can go a step further—helping with anomaly detection, pattern matching, and enabling scenario planning in real time. Treasury payment solutions are evolving quickly. Organizations that embrace data-first, API-connected, AI-enabled systems are building a platform to drive growth over the next decade—and to continue to scale into the future. Now is the time to modernize treasury operations. J.P. Morgan is dedicated to supporting your journey. Learn more here: https://bit.ly/4e4cXVI So here’s the question worth asking: Is your treasury infrastructure giving you control of the next decade—or anchoring you to the last one?

Big moves in payments infrastructure that every community bank and credit union executive should be watching. #Visa and #Fiserv just expanded their global partnership, and the implications go well beyond Europe. The two giants are embedding the Visa Acceptance Platform directly into Fiserv's cloud-native merchant acquiring and processing stack, creating a unified, API-first acceptance layer that simplifies integration, improves authorization rates, and reduces fraud and chargebacks across the board. For years, acquirers operating across multiple markets have dealt with the same headache: fragmented payment ecosystems requiring endless custom integrations and local compliance workarounds. This partnership attacks that problem head-on with a single connection point for authorization, intelligent routing, and data enrichment. Here is what I find most compelling about this. It is not just a technology upgrade. It is a signal about where the entire industry is heading. Cloud-native infrastructure. API-led connectivity. Embedded intelligence at the transaction layer. These are no longer aspirational roadmap items for community financial institutions. They are table stakes. For #CommunityBanks and #CreditUnions, the question is no longer whether your payment infrastructure needs modernization. It is whether your current core and payments partners are architected to keep pace with the ecosystem being built around you. If your technology stack cannot plug into unified acceptance layers, deliver richer transaction data to merchants, and support the agentic commerce protocols that Visa and Fiserv are scaling right now, you are already behind. The gap between the infrastructure that major processors are building and what most community FIs have access to is widening. That is both a challenge and an opportunity for institutions willing to act. #Payments #Fintech #PaymentsTechnology #DigitalBanking #CoreBanking #BankingInnovation #MerchantAcquiring #APIBanking #CloudBanking #FinancialServices #BankTech #FutureOfPayments #AgenticCommerce #DigitalTransformation #CommunityBankingTech

Many Brazilians had never used electronic transfers. Then their government built an API that transformed the payment landscape. Here's how one decision sparked a payment revolution: Brazil's payment system was broken. Wire transfers took days and cost fortunes. Banks operated in silos. Families paid crushing fees just to send money home. The financial system was failing millions of citizens. In November 2020, Brazil's Central Bank did something unthinkable. They didn't build another payment app. They created PIX - an open API standard that every major bank HAD to adopt. No exceptions. No negotiations. Pure infrastructure mandate. The technical architecture shattered every banking convention: • Real-time settlement 24/7/365 • QR codes working at any merchant • Phone numbers as payment addresses • Open APIs anyone could build on • Near-zero transaction costs But here's what made PIX revolutionary: The Central Bank became a platform orchestrator, not an operator. They set the rules and standards. Banks and fintechs built the experiences. This created competitive innovation on shared rails. Silicon Valley couldn't replicate this model if they tried. The adoption curve went vertical. Within just a few years, PIX processed billions of transactions annually, growing exponentially year over year. The system gained massive adoption across Brazil in record time. The transformation was instant and profound. Street vendors who lost sales without cash suddenly accepted payments via QR codes. Small businesses saw money clear in seconds instead of days. Previously excluded citizens could pay anyone, anywhere, instantly. The API had become social infrastructure. This is the power of treating APIs as public goods rather than private property. While US payment apps fight for dominance behind walled gardens, Brazil built shared infrastructure that benefits everyone. The lesson is crystal clear: Interoperability beats competition at scale. PIX proves what I've been saying for years - APIs are the supply chain of the digital economy. But Brazil went further. They made APIs the foundation of economic inclusion. Countries worldwide now study PIX's blueprint. When governments design platforms as open ecosystems, innovation explodes across entire economies. This drives our work at apidays. Created in 2012 in Paris, Apidays has organized 80+ events in 15 countries, gathering over 100,000 participants and 5,000+ speakers. It aims to democratize and evangelize the opportunities and the use of APIs for corporations and businesses to fully enter the next wave of digital transformation, the era of automation. Check the comments below to join our 300K+ community 👇

Banks have a golden opportunity to unlock a whopping $1 trillion in value by 2030 through the adoption of APIs, according to a McKinsey report. These APIs, often likened to versatile tools, have the power to help banks navigate open banking regulations, streamline complex legacy IT systems, and connect with a web of allied businesses. This, in turn, paves the way for innovation, operational efficiency, and the creation of exciting new products and services. So, what's the buzz about APIs in banking? Well, they're not just a concept; many banks are already reaping the rewards. Think tech advancements, deeper customer engagement, and business expansion. Notably, China has pioneered ecosystem models, uniting fintech, banks, and financial service providers for collaborative product development and technology sharing. Meanwhile, European and US banks are following suit, often partnering with fintech companies to diversify revenue streams and enhance customer experiences. APIs are revolutionizing specific banking functions, such as: 🌐 Open Banking: APIs enable secure sharing of customer data with authorized third-party providers, promoting competition and innovation. This results in new services and personalized experiences, giving customers greater control over their financial information. 🌐 Payment Innovations: APIs facilitate instant, secure payment transactions, powering mobile wallets, peer-to-peer transfers, and digital payment platforms. Banks can leverage APIs to offer seamless payment experiences, enhancing convenience and digital adoption. 🌐 Developer Ecosystem: APIs empower banks to create developer platforms, encouraging collaboration and innovation. By granting developers access to core banking functions, banks can rapidly develop and scale new financial applications and services. Embracing APIs empowers banks to transform traditional operations, foster collaboration, and provide tailored customer experiences. The journey toward API adoption is crucial for banks to thrive in the digital age and deliver innovative financial services. #APIsInBanking #DigitalTransformation #FinancialInnovation #BankingIndustry

API Banking Ecosystem Supporting Payment Services 💡 In the fast-evolving digital age, the landscape of payments, money movement, and financial transactions is undergoing a remarkable transformation. Customers increasingly expect instantaneity, accessibility, and unparalleled convenience from their digital applications. Financial services remain an exception, with high risk and switching costs, and a poor mobile experience does not necessarily drive consumers to the competition. As the Trading life cycle transitions from T+2 to T+1, and soon to a T+0-based same-day settlement, transparent access to trade data is regarded as table stakes. Powered by the Application Program Interface (API) micro-services architecture, money movement is undergoing a major transformation with adoption of real-time payment solutions and faster payment rails. Banks will need to build/enhance their API infrastructure to provide real-time access to bank account information, initiate transactions, and make core credit/debit updates ⏱ Now that innovative practices such as Banking as a Service (Baas) are allowing a diverse range of players such as Fintechs, third-party developers, and other businesses to innovate and provide value-added services on top of established banking infrastructure, the time is right for the world of wealth, retirement, and brokerage to take notice and begin to plan for the future of their business 🔎 The rapid rise of API Banking is forcing an evolution of the payments landscape, transforming the way customers and companies interact with money and unlocking innovations that were previously confined by legacy systems and manual processes. With its capacity to enable real-time 24/7 transactions, seamless integrations, and unprecedented levels of customization, API Banking is setting a new standard for financial services. By shifting to a relatively standardized, online based toolset, API Banking also facilitates collaboration between traditional financial institutions and third-party providers, blurring traditional distinctions and creating a dynamic ecosystem where the convenience, security, and innovation demanded by today’s diverse range of users can be met. As the payments ecosystem continues evolving, more companies will begin adopting and developing API Banking solutions and exposing their products and services to third parties. The next steps are ensuring data security, navigating regulatory landscapes, addressing integration complexities, and innovating. These vital aspects each demand careful consideration and mandate companies proactively make investments to remain competitive, differentiated, and relevant 👨💻 Source: Deloitte - https://t.ly/eddiS   #Innovation #Fintech #Banking #OpenBanking #API #BaaS #Microservices #FinancialServices #CoreBanking #Payments #Transaction #Clearing #Settlement

The Symbiotic Relationship Between Open Banking, Banking as a Service, and Embedded Finance In the rapidly evolving landscape of financial technology, three independent but interconnected concepts have emerged as drivers of innovation: 1️⃣ Open Banking and/or Open Finance 2️⃣ Banking as a Service (#BaaS) and/ or other business models incumbents will assume to monetise the opportunity, and 3️⃣ Embedded Finance. These paradigms are creating a #symbiotic #ecosystem that is starting to reshape the entire financial services industry. ⏹️ Open Banking: The Foundation Open Banking serves as the foundation of this ecosystem. It refers to the practice of banks sharing financial data and services with third-party providers through secure APIs. This initiative, often driven by regulatory changes, aims to increase competition, foster innovation, and improve customer experiences in the financial sector. 🔼 Banking as a Service: The Bridge Building upon the #infrastructure of Open Banking, #BankingasaService (BaaS) acts as a bridge between traditional banks and innovative fintech companies. BaaS providers offer a range of banking functions—such as account management, payments, and lending—as white-label services that can be integrated into other products or platforms. This allows non-bank entities to offer banking services without the need for a full #banking license or infrastructure. 🔼 Embedded Finance: The Ultimate Expression #EmbeddedFinance represents the culmination of these trends, seamlessly embedding financial services into non-financial products, platforms, or services. By leveraging #OpenBanking #APIs and BaaS offerings, companies across various industries can incorporate financial products directly into their customer journeys, creating more holistic and frictionless experiences. This symbiosis drives innovation, improves accessibility to financial services, and creates new revenue streams for both incumbent banks and non-financial companies. It also empowers consumers by offering more choice, personalization, and convenience in managing their financial lives. As this #ecosystem continues to evolve, we can expect to see even greater integration of financial services into our daily lives, blurring the lines between banking and other industries, and ultimately reshaping the very nature of finance itself. Arthur D. Little #fintech #payments #insurance #investments #loyalty #savings