Chief Digital OfficerDigital Transformation

Open Banking as a Platform – Architecture for Disruptive FinTech Business Models

Harnessing the Platform Business Model for disruptive digital banking business models

Massive new startups like Uber taxis, Airbnb and many more are pioneering the ‘On Demand Economy’, implementing a Cloud-based On Demand Business Framework which overlays a ‘digital mesh’ across a marketplace of vendors, such as taxi drivers or travel accommodation.

The repeatable secret sauce is the Platform Business Model, described in detail through academic literature and popular business books. For example the MIT book ‘Platform Revolution‘ describes these hyper-scale disruptors like Netflix, Uber, Airbnb, Facebook, Twitter et al, as the book describes:

“Facebook, PayPal, Alibaba, Uber-these seemingly disparate companies have upended entire industries by harnessing a single phenomenon: the platform business model.”

The book builds on prior MIT research, such as this detailed 2007 research report on Platform Networks, this highly recommended presentation Platform Strategy and Open Business Models, and in a simpler format in this presentation, which defines:

“A “Network platform” is defined by the subset of components used in common across a suite of products (Boudreau, 2006) that also exhibit network effects. Value is exchanged among a triangular set of relationships including users, component suppliers (co-developers), and platform firms.”

The Enterprisers write that “If you’re not participating in the digital ecosystem as a platform, you may become disintermediated”.

Maturity Model – APIs and Microservices

As Gartner describes APIs are at the heart of the digital platform business model, a topic they explore through their Gartner Platforms series, and major market players like VISA and Citibank have pioneered early API programs.

APIs are about making the business ‘programmable’, like how it enabled the ‘platformication‘ of the Evernote business model, and Digital leaders like Pearson have pioneered them to underpin their platform strategies.

In this Linkedin blog, Anil Madan specifically describes the role of the API in the Platform Business Model, and also suggests this API Maturity Model:

  • Basic – exposes a basic API with standards, fully tested.
  • Self-served – complete developer experience, available on a services portal with complete documentation and samples.
  • Performant – Complies with Service Level Objectives – response-time and availability. This should be table stakes before APIs are exposed to 2-party and 3-party.
  • Isolated – fully isolated, with code and data encapsulated.
  • Portable –portable units built around a container technology that can be independently deployed ideally in a cloud.

The Forbes blog 2017 year of API Economy describes an API Maturity Model:

and begins to explore a headline theme within this maturity journey: The complimentary fusion with a microservices architecture.

Chris Gambino, Google Customer Engineer, documents a case study of documenting a Restful API for Walmart.

John Musser, CEO of API Science and founder of ProgrammableWeb, offers 20 API models in 20 mins discussing the progression of API business models and offers examples of companies that have successfully matched their strategy with the appropriate model. (also shared via this Slideshare presentation), and explores Real API Models that Worked – a number of startup scenarios that successfully employed an API model.

The strategic role of the API is eloquently framed by the Swisscom team from their experiences of developing APIs to enable new customer services, where they came to think about it instead as a ‘VPI’ – Value Proposition Interface, and with this in mind Google engineers recommend managing APIs as products.

Open Banking Platforms

Open Banking is a keynote trend that showcases the potential for these exciting developments. FinTech Futures describes how it will impact the banking sector

“This development emerges out of a perfect storm of shifting customer behavior, regulatory changes, the threat from digital ecosystems such as Google, Apple, Facebook and Amazon (GAFA), and the quest for new business models are driving banks toward open banking.”

The Open Banking Initiative has begun the industry-wide open standards work required to make this scalable and of course, truly open, such as publishing the first versions of the payment initiation specs and Open Data specifications.

In this documentary experts including Kevin Hanley of the RBS explain how they’ve shifted from ‘point to point’ integrations between business systems, to APIs because these are more efficient and critically, enable the open ecosystems that stimulate creative innovations that power new products that customers value.

API Platforms for Enabling FinTech Innovation Ecosystems

In their Open Banking article Cap Gemini highlights how an API platform will provide the foundation for cultivating a developer innovation ecosystem:

“This involves the creation of secure APIs by the banks that will be able to perform these activities on your account. This will allow third-party providers, such as FinTech companies, to be able to write applications that consume these APIs and perform these financial transactions on your account.”

In their article Data Sharing and Open Banking McKinsey define three distinct types of API:

Model type Attributes

Public / open

APIs used by external partners and developers who build innovative apps and products.

Innovation through engaging developer community

Extended market reach

Partner / B2B

APIs used by business partners, including suppliers, providers, resellers, and others for tighter partner integration.

Reduced partner costs

API monetization

Enhanced security


APIs are used by developers within enterprise.

Cost reduction

Operational efficiency

Enhanced security

They conclude with this strategic recommendation:

“Regardless of location, over the next 18 to 24 months banks should capitalize on their incumbent advantages by taking the following actions:
  • Explore data-sharing agreements with fintech and nonfinancial services firms to stay ahead of the curve.
  • Develop a perspective on APIs and their benefit to the bank’s service model, both in leveraging mandated third-party access and potentially extending access beyond statutory requirements.
  • Fully understand both existing data privacy mandates and likely changes, and determine their institution’s appetite for a less conventional approach. And examine how customer messaging would best facilitate any such change.

Banks will need to address the potential loss of revenue from existing payments revenue streams resulting from the lowered barriers to competition. Change is rarely comfortable, but as market evolution in the United States and other countries illustrates, the forces of change are inevitable.

Banks are better served getting ahead of and defining the trend rather than waging a futile battle to repel it.”

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