Banking Services


The open apis of facebook and twitter are successful because they allow the developers to build applications that can serve hundreds of millions of users. The apis of AWS are popular because they are accessible to anyone with internet.

The apis of Mailchimp are popular because it’s useful to anyone who wants to market on the internet. The common theme amongst all successful api platforms is that they

  1. Are universally accessible
  2. Have a wide variety of use cases
  3. Have a very broad reach — in most cases global.

There are not many instances of popular hyper local apis. Specialization tends to limit both the usefulness and the outreach of your platform. The goal of any open api platform is to increase the reach of your services. But that works under the assumption that the service is supported by the platform itself. As an example you can request provisioning of AWS instances from the command line using the AWS api but it wouldn’t have any meaning if the api request to provision a new server were not supported by the operation of actually creating a new instance on your behalf. Consider again that a public api on the internet comes with the expectation that it’s available to and can be used by anyone with access to internet.

As a programmer there’s nothing more delightful for me than being able to play with a new api. Earlier this year VISA and MasterCard made their apis open. I poured through the docs to see what I can do with it and how I can make use of it in my existing applications, however I was disappointed to find that for majority for the endpoints you need a BIN (Bank Identification number) to be able to make it work in production.

Now I’m not questioning the reasoning behind such a requirement. Given the sensitive nature of the transactions that are being made it’s of utmost importance to be very careful in allowing the production use of the apis, however the price of such carefulness is that the api looses its universal appeal that it should have considering the diffusion of both MasterCard and visa in the world. And by the same token when it is being said that financial api will be more accessible what is meant is that they will only be more selectively accessible. In other words apis of banks/card manufacturers will not be completely open like that of paypal/facebook/twitter. And given the fact that Banks and card networks always had an api that was selectively accessible we don’t have much of an improvement from our previous state. Banks don’t and can’t for the most part make their services universally available.

There is no international bank in the truest sense. Sure there are local branches of “multinational” financial institutions, but all banks operate within the policies and framework that is set by the host country. So we have a PSD2 that will work well in the EU but won’t affect people NA. Similarly we have a UPI that will work well in India but won’t have any impact in South Africa. The current strategy seems to be pushing for sweeping regulatory change across continents in a hope that banks, governments and people will set aside their competitive differences and work towards a better financial future. If only! I do believe in fairies and miracles but I’m highly doubtful of a cooperation among banks of the world in a happily ever after ending. All is not lost however, there are other ways to attack the problem.

[One important insight here is that even with the limitations of accessibility the APIs of both mastercard and VISA have a global reach. The lesson to learn here is that somehow the card manufacturers have managed to create a global network of data on top of segregated banks disjointedly operating across the world. ]

The Markets

One way to address the problem of International banking is by tailoring the services towards markets that are already operating internationally and depend upon partnerships and cooperation between numerous complex entities. These entities form natural bridges that transcend physical borders and reach people all over the world. Tourism industry along with other sub industries that complement it (like hotels and airlines) is one of the most valuable market and should be a top target for any ambitious bank. Among the contenders Charles Schwab emerges as the most tourist friendly bank with it’s travel card. Revolut, in partnership with Barclays and MasterCard, has also managed to gain widespread market acceptance in a short time frame.

What’s surprising,however,is that the success of both Charles Schawb and Revolut has gone largely unchallenged. Year after year UNWTO (United nations world tourism organization) publishes health reports of tourism industry that clearly places it as a trillion dollar, recession proof, global market and yet we hardly see any inclination of banks to exert smallest of efforts in order to gain even the tiniest of shares of such a big market. The passiveness becomes even more inexplicable when you consider that on one hand there seems to be a drive to expand market services to a broader audience by distributing it through open apis but on the other hand, the one market, the one distributed by default market, that is assuredly in need of better services is being completely ignored. What gives?

Tourism is not the only big global industry. We have telcos which, rather unsurprisingly, are either applying for a banking licence themselves or they’ve already got it. Here in India nearly all of the big telcos (reliance, airtel, tata etc) have got a banking licence. What’s interesting to note is that the over the years telcos have managed to create widespread SIM distribution networks. And, this is where it gets interesting, the data collected for issuing a SIM is not all that different from the data that is needed to open a bank account / issue a PPI (pre paid instrument). Add to this the fact that a visitor going on a long trip often shops for a local SIM, it’s not that big of a stretch to conclude that there could soon be a SIM+PPI combo as a customer acquisition strategy for telcos looking to expand into the banking sector. Taking this thought a little further it would not be surprising to have major players in the tourism industry offering banking services to their customers as well. So, for example, there could very well be an airbnb bank that would extended their services from just hospitality to wealth management for tourists.

The Demographics

It’s clear that the latest banking apps are being targeted at millennials even though the highest concentration of wealth is with people in another age bracket all together. While it’s true that the messaging apps have succeeded with a product that is built to appeal to the youth.But when it comes to banking it would make sense to make applications that speak to experience. To people who can actually spend money. Consequently the features that need to be built should incline more towards convenience and luxury.

Acquisition

Given that banking apis would be most impactful when they are available to as large an audience as possible we need to need to expand the scope of banking services from something that operates on a local level into something that works internationally. Now to do that we could wait for the policies to become more open and more friendly. But who knows how long that’ll be? One must remember the shortness of one’s life. The light that flickers but for a moment. The consciousness that subsists but for a few breaths. The journey that ends but after a few steps….. And we can’t wait that long, now can we? We must be a bit more positive in our approach and do something that is within reach right now.

Traditional, run of the mill ideas won’t work here. That’s already been done to death by everyone else. We need something wacky, extraordinary enough that no one would attempt but still be implementable by one who chooses to try. Absurd yet realistic, tricky yet beneficial.

The first thing that needs to be done is to reduce the customer on boarding time. SAAS services seem to have mastered this art by letting the customers use their services with nothing more than an email id. Banks are a bit more complicated. Prepaid Payment instruments (or PPIs) with a multitude of use cases and soft -KYC requirements form a very natural user acquisition strategy. By carefully selecting a range of PPIs to serve the inbound and outbound tourists, building distribution channels that allow PPIs to be sold in the same way as SIM cards and use the customer data collected in the process we must sow seeds that can sprout even more services.

Now tourism is a very big industry. According to UNWTO report a staggering 1.1 billion tourists travelled abroad in 2014. That’s about 27 Million tourists a day or 1500 high capacity jumbo jets flying every hour full of adventurers eager to explore the world. If a bank were to limit itself to serve only the tourism industry the benefits would be endless. A global tourist bank that can align itself with UNWTO motto of “responsible, sustainable and universally accessible tourism”would have tourists flocking towards it just like they are doing with an app like revolut.

But if we dig a little deeper and bring to light the fact that the tourists are actually people(!) we can do more than just play catch up.

Redefining banking services

The idea behind banking apis is a good one. This shows the positive intent of the banks to allow people to take control of their accounts in a more meaningful way. However there is not much to be gained if that plan is not accompanied by the willingness of the bank to expand their core set of services. The novelty of managing your accounts programatically will wear off. And we’ll be back to square one. Technology is not an impediment. The problem is creation of new services and not their distribution. Therefore there is more to be gained if the plan is executed in reverse. New services should be tested and implemented in real world before making them available as apis. By creating specific markets for api based services banks become more than just money management institutions. Banks need to be the bridging gaps connecting distinct, apparently unrelated markets. Thus it becomes important that they are able to build functionality to quickly test and discard a service to determine which ones are the most profitable.

As an example consider ed tech.Banks should be able to provide infrastructure that not only lets educational institutions manage their wealth but also allow them to collaborate better with institutions around the world. Student exchange could be much smoother than it currently is, services can be developed that facilitates educational tourism. How about a service that distributes travel cards at the graduation of a language learning course? There is talk about getting young people on your platform. Though I’ve my doubts about the effectiveness of the strategy of acquiring a younger demographic, is there a better time to catch them, than when they are in college? Giving them a taste of your banking services at an impressionable age might gain you a lifelong customer. The services ( actually tested in the real world) that are developed during the execution of such an idea could be released as an api for distribution, targeting educational institutions specifically.

The advantage banks have, should they choose to use it is that their customers are people from all walks of life. Banks already touch the lives of people. Banking services don’t. Which is why there are all kinds of stop gap applications that don’t do much except connect the dots. This is the problem that needs to be solved.

And the reality is obtaining a banking licence today is not all that hard for big technology companies. If you take a look at someone like google/facebook who are very aware of the habits of their users and have built systems that have done nothing but collect data for decades, the prospects look bleak. Nothings stopping them from creating a bank of their own that offers the same services as current pack of financial institutions only more digitized, more convenient and more “customer friendly”. Competing head on with them is not a great idea. Banks need to recognize this and play to their strengths. Trust and customer loyalty. That still counts especially where money is involved. The best move here is to change the rules of the game. Data is relevant only in a specific context. By targeting customers who on the surface should have no apparent interest in a local bank, banks get to entertain a possibility of creating a global marketplace and stand on equal footing with the competition. If we play it well, maybe it’ll even tilt the fortune in our favour. I do believe in fairies and miracles!

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  • On January 26, 2020