Why our future is all about collaboration
From making mobile payments to automated account reconciliation, much of the technology we rely on today depends on the swift, efficient and secure transfer of data from one platform to another.
Whether it’s being shared to a third party platform, or within the same organisation, the mechanism for passing or connecting that data is known as an application programming interface (API). And, the key word for APIs is 'open'.
“Open platforms allow for a secure free flow of connectivity,” explains Wayne Lipschitz, Open Platforms Product Owner in Macquarie’s Banking and Financial Services Group.
“The same necessary rules around client data security still apply, but as long as they meet that criteria, any third party provider can securely connect through an open API.”
We see a lot of opportunities for our clients through the innovation an open banking platform can provide.
This is a mindset shift away from proprietary control, which was traditionally driven by commercial demands. “For example, Apple’s iPhone is a platform – beyond the device you have all the apps, but it’s a closed platform,” says Lipschitz.
When systems can talk to each other, innovation and collaboration is accelerated.
“There is regulation coming through to ensure open banking platforms,” says Lipschitz. In Europe, the Payment Services Directive gives clients control over their financial data – so if they give their consent, their bank must allow data sharing and payments with third parties that meet the necessary standards. An Australian data sharing framework was also recommended by the Federal Government’s Standing Committee on Economics’ Review of the Four Major Banks: First Report.1
Macquarie announced its own Open Platform in May, to enable seamless data integration between its banking platforms and third party providers.
“We believe big tech and fintech will converge with financial services, and we want to support the new experiences for clients that can come from this,” says Lipschitz.
Macquarie already had closed connectivity for its business banking and wealth platforms. “This will take our services to the next level. We see a lot of opportunities for our clients through the innovation an open banking platform can provide.”
Seamless experience, industry-relevant solutions
Open APIs have a strong track record of fostering innovation. For banking clients, this means new products that make life and business tasks easier by sharing data to streamline, automate, recommend or provide greater visibility.
“Through the Open Platform developer portal, external developers can test their apps in our ‘sandbox’ – a test data environment that mimics production,” says Lipschitz. When available for business accounts, this solution could integrate with accounting software providers such as Xero, whereby account information will be securely accessed when you register with Xero – no paperwork required.
He believes an open platform empowers smaller players to participate, filling gaps for targeted industry issues. “We’ll see many niche services emerge to solve specific use cases – solutions that will help clients run their business and have a much better experience.
Efficient, cost-effective innovation
For fintech start-ups and software developers, open APIs provide access to existing infrastructure, saving time and money in the development process.
“API is referred to as both a pipe and a building block,” says Lipschitz. “It distributes the data, but it’s also a bit like Lego: you can put different APIs together to create something unique.”
Open APIs will underpin future collaboration – and bring exciting new services to clients much sooner.
It’s hard to imagine any developer feeling the need to reinvent Google Maps, for example. It powers many location-based requirements for other apps and platforms, and as pricing scales with usage it’s far more cost-effective than building and maintaining the service yourself.
Securing sensitive data
“We are seeing a lot of fintechs coming up with really useful services that our clients may want to access. But with the most important factor with open platforms is security, which is why we use encryption and tokenised services with our third parties to protect client data,” says Lipschitz.
“Some other third parties might use screen scraping to access data, but we don’t think that’s secure enough. Our clients undergo a secure authentication process, first to access the service and then to pass data across. Once you have accessed the service it can be immediately stopped via the Macquarie Banking app.”
Once that authorisation is granted, everyday transactions could become a lot easier. While Lipschitz admits there are no truly open banking platforms yet in Australia (“but we’re working on it!”), he says the opportunities are endless.
“For example, a third party app like Pocketbook could provide one real-time view of all your money and help you budget and manage it more easily. And this could also apply for SMEs – imagine all your accounts, insurance, loans in one dashboard, without having to feed data in via files.”
Another example could provide real estate agents with a quick online rental application. “If the applicant is a Macquarie client, once they’ve given their permission, the app can pre-populate the digital form with their personal and account details. For the agent, this could identify potential risks upfront.
“For the tenant, it could also ask them if they want to set up a recurring rent payment, contact utilities, advise the new strata manager and provide any emergency maintenance contacts. In a few clicks, it would take all the pain out of moving for the renter – and help the agent assess applications in an instant.”
With potential like this, it’s no wonder that globally over three-quarters of banks and fintechs say they’re counting on APIs to help them improve customer experience – as a recent Capgemini report found. Plus, more than 90 per cent of banks and 75 per cent of fintechs expert to partner with each other in the future.2
Although it’s often hidden behind the scenes, open APIs will underpin future collaboration – and bring exciting new services to clients much sooner.