Last week we announced that Skandiabanken will be supporting digital currencies by integrating to Coinbase and exposing the account balance held at Coinbase. The real innovation really has little to do with bitcoin and digital currencies, but rather a representation of the way open banking will shape new products development and customer experience.
When I say that this represents a direction I believe in, that is a simplification of reality. In fact, this represent several directions I believe in.
Firstly, digital currencies show all the signs of an alternative asset class, and should therefore be treated as one. Whether investors chose direct exposure to bitcoin or other altcoins or invest through digital currency ETFs, digital currencies as an asset class is growing at a rapid pace. After all, the value of an asset is no more than the sum of a shared belief of its value. This acted as the fundamental principle behind the concept of money itself, and is also be applicable to cryptocurrency-backed securities.
Secondly, I believe in giving the customers the freedom of choice. As a born-digital bank, letting the customers be in charge is a fundamental principle in everything we do at Skandiabanken. As customer behavior and expectations change, so must the banks.
This also act as an example of how incumbents should approach innovation efforts. In order to keep pace in a rapidly changing world, incumbents must change the way we work. It is no longer sufficient with long product development life cycles based on waterfall development and rigid toll gates. We should expect to see technology having a huge impact on every aspect of society in the years to come from everything to artificial intelligence, widespread adoption of blockchain technology just to name a few areas. This will shape customer behavior, business models and required skill sets and leadership in a new business environment where speed and agility are the primary competitive advantages. In order to adapt to a changing environment one must embrace lean development principles and shorten time to market through shorter development cycles. By utilizing the APIs offered by Coinbase this was made possible as an MVP (Minimum Viable Product).
Lastly, use of third-party APIs represent one of the core principles of open banking. An API is in its simplest form a standardized protocol for computer programs to talk to each other and is integral for modern software development, and is at the heart of open banking. If executed correctly an API strategy propose to increase innovation, foster collaboration, extend customer reach and lower costs compared to existing legacy systems. A key concept in the open banking paradigm is to use open source technologies to enable third-party developers to build financial applications on top of the banks’ exisiting infrastructure as well as the ability to connect and expose third-party data in the online banking experience in a user-friendly and secure way.
By allowing third parties to add functionality to their core offering, these companies becomes platforms for third-party innovation. Besides driving revenue, it also shortens time to market through crowdsourcing and co-creation of new products and services as well as service customer needs through customer demand driven development.
When software is eating the world, a company without APIs is like a computer without internet. If software developers are the new rock stars, then APIs are their instruments. There are more than over 12,000 APIs listed on Programmableweb and these should be considered a source for inspiration and innovation for everyone working on digital business developement.