API Business Models

API Monetization: How Fintechs use API Interconnectivity to Drive Revenue

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When we first started Sipios back in 2017, the NPS (Net Promoter Score of the industry) in France was minus three and we aimed at raising the level of the whole Fintech industry to NPS 60. 

In the last two years, we’ve seen a crazy acceleration in the FinTech scene, and a way to explain this is the reduction of time between the moment you start to build a project and the time you generate your first euro. The first project we did took 28 weeks to start making money, almost five years ago. Last year, we built a lending platform during the credit crisis in three weeks only. Five years ago, everything needed to be custom-made whereas the last one was API-based. Over the last eleven months, we’ve seen 5000 new fintechs in the field with more and more products popping and we now know that 20% of the market is less than 15 years old. That makes for a lot of people aiming at the same pie. How do they split it? Basically, we see two branches. One is infrastructure providers, they’re creating all the bricks necessary to operate. The other one is end-client experience providers, building propositions that end customers love on top of these services. Obviously, those connect through APIs. When we take a step back and look at the big picture in tech, we realise we’ve had successes in both areas but the tendency is that end-client experience players tend to capture most of the value.

How do you personally navigate in these spaces? 

If you are an infrastructure provider, then you’re on a high volume, low margin business. The fight for margins is going to be tough, and eventually your game is to integrate as many services as you can and you’ll use APIs as a temporary solution. On the other hand, if you are an end-client experience player, then you’ll try to connect as many services as you can to become a central node in an ecosystem. The trend is to connect more and more APIs to become the entry point in the ecosystem and that’s what Qonto is doing at the moment. 

Use case: Qonto Connect

The goal today is to reflect on how to navigate in a space that is more and more crowded, and how to use these interconnections between all the financial tools to drive value and revenue. Qonto’s mission is to create the finance solution for SMBs by incorporating all financial needs within the same platform. SMBs rely more and more on SaaS to handle their finances and business accounts. They need to access their accounts, but also their spending management tools, their bookkeeping tool, cash flow management etc. Having to jump from one platform to another is complicated and costly so our aim is to recreate all this in one platform solution. Obviously, we are not the only ones who had the idea so the competition is fierce. So that’s the first problem we encounter. Secondly, even though we provide all solutions under one roof, some people still want pure players on some verticals, such as bookkeeping. Finally, the last problem that we face when trying to build this all-in-one solution is time. If you want to build everything in-house, you have to invest time and resources, which means you can’t provide your customers with the services overnight. Thus, in the meantime, our strategy relies on a marketplace that we call “Connect” and our goal is to be the most connected finance tool in the ecosystem. We are trying to provide as many integrations as possible so that customers can use all their tools and financial stack seamlessly together. 

Two examples of integration and how to monetize them

Such a complete solution is costly for us to develop so our key point here is to drive revenue through this marketplace and all this interconnectivity that we created. 

First model: increase ARPU with premium integrations

  • Type of integrations:

– Deep integrations with complex use cases

– Requires heavy tech/product work on both sides 

  • Values for users:

– Eradicates mistakes

– Wins hours back every month

  • Business model:

– Increases ARPU by adding these integrations to higher price plans

– Hard to get huge volumes of integrations, hence users

This approach works well, does bring value to customers and increase NPS but it doesn’t drive as much revenue to you. It is costly to develop, time consuming and you don’t touch your whole database of clients but only some sub-segments. 

Second model: increase LTV via users’ stickiness with high coverage

  • Type of integrations:

– Light integrations (no tailored UX needed)

– Leverages automation software (e.g: Zapier, Integromat) to increase coverage quickly 

  • Values for users:

– Custom-made workflows

  • Business model:

Hard to sell the integrations standalone but increased LTV thanks to higher stickiness

Thanks to this approach, you can use control with 1000s and 1000s of tools.

Q&A Section

Q: What is moving people to change banks? 

A: As far as b2b is concerned, it happens when people have problems with a service. For the third time in a row, they can’t do a transfer or someone at the bank is unable to solve the problem. Disappointment triggers the move and then it is really easy because you can register in a new bank online in five minutes. 

Q: How are the APIs then making a difference?

A: Not having an API can trigger the moment when the bank creates too much friction for you. For instance, I’m using this very new spend management tool but then I want to import all the transfers that I created on this tool to my bank. And guess what? It doesn’t work because the format I’m using doesn’t work on the bank. You call customer support and they have no idea how IT works. That’s too much. I want something more modern that works for my modern stack. Not having the right API can generate a lot of frustration in the user. 

A: I think the main difference between the professionals and individuals is the recurrence of the usage. When you have friction, as a professional, you have friction every day.

They’re two very different things. The b2c is very planned purchases and moments of life change and then the b2b is clearly reaching the final straw and impulse purchases. 

“API Monetization: How Fintechs use API Interconnectivity to Drive Revenue” by Marc-Antoine Lacroix, CPO at Qonto & Rodolphe Darves-Bornoz, Co-Founder at Sipios

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