API Business Models

The new API mindset: Helping finance enter into the programmable economy


More and more companies across industries understand that APIs (Applications Programming Interfaces) are the way to re-align IT and business; to increase agility while reducing time from ideation to innovation; and to consistently deliver value in a digital world. This is even clearer to see in the fintech world, where regulators are now requiring financial institutions to open APIs to facilitate innovative ecosystems.

For the last 10 years, on the startup side, companies like Stripe in the payment space have demonstrated that APIs are the next distribution channel of the programmable economy. And if you understand that well, you’re worth $22.5BN in less than 10 years. Because your interface is well designed, the vast majority of your customers are more likely to integrate your services autonomously in a totally self-service manner.

Encouraged by regulations in many jurisdictions that are now forcing banks to open APIs, investors are supporting a new generation of banks and fintech services enabled by APIs. Two years ago, in 2017, this new ecosystem already represented more than $100BN in funds raised and almost $900BN in valuation. The perfect examples of this new industry landscape are the neo-banks, like Revolut, N26, and Starling Bank, who take back value from the banks that lost focus on customer experiences.

Do what I say, not what I do: what the corporate world did not get until it was too late

Corporates dream of innovation and disruption and talk about it all the time but only the young and agile startups are really in the position of doing it. Many examples of billion dollar startups have recently appeared like Stripe in the fintech space and Twilio ($14.5BN market cap) in the telecommunications industry. Marc Andreessen, one of the most iconic venture capital investors in Silicon Valley, said it in 2011: “Software is eating the World”.

What he meant by this statement is that the best financial companies of tomorrow won’t be banks who do software, but software companies who do banking. Preceded by the idea of Chris Andreessen in 2008 “The end of Theory”, companies who understand software and data don’t need to be expert in their business to be good. They will learn so much more, so much faster, with so much more data and interaction that in the end, they will perform better than companies who were specialists for a long time but who relied on legacy. That is, those who focused on “experience and accumulated knowledge” rather than looking at the data to understand their customers. We are in a world where past knowledge is obsolete: it was not the candle experts who built the light bulb.

And in a distributed world more and more connected, as Steven Willmott says: “If software is eating the world, APIs are eating software.

If software is eating the world, APIs are eating software

In this emerging context, some companies understood that they don’t need to just adapt their company to APIs, they need to adopt APIs at the core.

Directly inspired by tech giants like Amazon, Facebook, and Google who put an API strategy at their core growth and innovation engine, these companies are embracing new internal governance models, new integration partnership strategies, and ultimately new monetization models. These companies come from many industries, lead by the financial world. To name a few : BBVA, Capital One, Allianz, but also Airbus, Lufthansa, and Walmart.

For those companies still reluctant to open APIs to innovative ecosystems, regulations are now forcing entire industries to play. It began with the banking industry in Europe when Open Banking UK and PSD2 regulations required integration capabilities between banks and third party providers, and has been followed by Australia, India, Singapore, Hong-Kong, Mexico, South Africa. Canada and the USA are next in line.

Other sectors are also impacted. The healthcare industry began to impose some API standards like when governments in the US and globally introduced FHIR and HR7 requirements for providers to manage medical records. The logistics and supply chain industries are also moving forward towards more shared API standards to compete with Amazon…. This is the reality now, not tech press and API industry wishful predictions.

Bringing the API Mindset to corporate and financial business

For corporates, adopting APIs means thinking about APIs at the core of their model. On the technical side, it requires new skills for new roles like API product manager and APIOps. But the most important and first step is culture, with the intent of integrating an API mindset.

The API mindset consists of organizational changes, strategy, and practice to align IT and business around APIs, as interfaces to deliver business capabilities away from legacy systems. But of course, all the while doing so without changing over time, respecting a technical and business contract, enabling ecosystem to play their part, and business model to become programmable as they scale with their integrated and dynamic ecosystem.

Long story short, the API mindset means being API driven by thinking that every service in the company should be as Jeff Bezos shared internally to all its employees in 2002, designed from the ground up to be externalizable via APIs that developers will love.

The API mindset is about thinking API-first, building the API before the website or applications so that an organization can deliver the same service to all channels via a unique interface, seeking customer experience rather than product delivery.

The API mindset is about thinking beyond just API facades to define an interface contract that if respected will enable a company to refactor technical debt, and decouple the monolith into smaller services without losing customers. Because at the end of the day, respecting the interface contract is the technical and business promise of the API economy. Like Werner Vogels, CTO of Amazon Web Services, says: “code can change but APIs are forever”.

The API mindset is about thinking of API-as-a-product, designing and building APIs to be delivered and implemented internally to increase business breadth, and monetized in a business context.

The API mindset is about building a strong developer experience and creating a powerful API design. These are the mandatory skills to enable application builders to build great user experiences on top of your platform.

The API mindset is about continuous management of your APIs: to always make better decisions by knowing exactly what service is used, by who, where, and how many times, in order to monitor and drive your architecture and your business,

The API mindset is not about a technology or an architectural style or an IT project. It is about leveraging internal energies to make companies think bigger, deliver faster, and be more resilient. This is the only way for corporate giants from all industries, to resist disruption and adopt digital transformation internally and externally. Because agility is what drives businesses in the digital world of today.

Mehdi Medjaoui
Mehdi Medjaoui is the founder of the worldwide apidays conferences series he started in 2012 in Paris. Mehdi is highly involved in the API community and API Industry, as author, lecturer, consultant and investor in the API tooling space. His industry research involves publishing and maintaining the API Industry Landscape and the yearly State of Banking APIs. In 2018, he publishes as co-author "Continuous API management" (O’Reilly) and begins as lecturer and invited professor at HEC MBA and EMLyon Executive MBA. In 2019, Mehdi become H2020 European Commission expert to lead the APIS4Dgov study on public sector and government APIs. As entrepreneur, Mehdi co-founded in 2014 OAuth.io, an API middleware for OAuth intégration used by 40,000+ developers that has been acquired in 2017. Mehdi’s new venture GDPR.dev develops a Personal data API framework and protocol to democratize data regulations usage for mass users and compliance for applications developers, making GDPR programmable.

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