The API Economy and Digital Transformation in Financial Services: The Case of Open Banking
By Markos Zachariadis (Warwick Business School) & Pinar Ozcan (Warwick Business School)
Abstract: In this paper we seek to do two things. Firstly, by exploring the fundamental properties and various applications of open application programming interfaces (APIs) mentioned in extant literature, we articulate what are the relevant theories that give rise to the new organisational structures and platform business models we observe in the digital age. Understanding such phenomena will help us anticipate, and in some ways predict, the implications of public APIs’ adoption in the financial services sector. The second part of our paper exposes some of our findings around the key challenges and opportunities that open APIs pose for the banking sector in the UK and the EU following the introduction of the Open Banking Working Group (OBWG) and Second Payments Services Directive (PSD2) regulatory frameworks. Our insights were produced from extensive field research and interviews with key industry experts between July 2016 and February 2017. Our use of theory helps us translate these findings and provide recommendations for financial institutions, FinTech startups, technology companies, and regulators. We hope to help them prepare for some of the key changes and issues that the financial sector may be facing in the next few years as the use of open APIs becomes more ‘mainstream’.