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Technology 11 Dec 2018

What are APIs and why do they matter in banking?

In a world flush with acronyms - hello, banking! - “API” might seem like the latest notable term. But the truth is, APIs, or Application Programming Interfaces, have been on the scene for many years, and was made popular in the year 2000 when SalesForce officially launched its web-based sales force automation.

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APIs continued their ascent into ubiquity with eBay later that year, but according to APIEvangelist, it wasn’t until the birth of social platforms that APIs truly gained their status as tech industry essentials. Now, with financial institutions looking to a future where technology is king, APIs have become a key component for banks to extract business value.

So what then is an API? To put it simply, an API is the connection between two servers, which allows the two of them to talk to one another.

Consider this fictional scenario: Trig is the founder of a fintech startup, BudgetWell. BudgetWell is a new budgeting platform that offers checking accounts and aggregates other outside accounts so his customers can have a holistic view of their finances. Only, BudgetWell isn’t a bank, and doesn’t have the manpower or money become one. In order to offer a federally insured checking account, Trig has decided to collaborate with BBVA Open Platform, which offers an account origination API. By connecting BudgetWell to the BBVA Compass Open platform through the latter’s account origination API, Trig is able to create BudgetWell-branded individual deposit accounts maintained at BBVA Compass directly through BudgetWell’s platform.

In the scenario above, BudgetWell, BBVA Compass and the consumer derive value from sharing an API. Here’s how:

  • Trig can focus on creating the best possible budgeting tool in order to drive consumer adoption, without worrying about also building a deposit account, and many of the legal, regulatory and compliance ramifications that come along with it. BBVA Compass has already done that for him.
  • BBVA Compass built the rails to provide deposit accounts to its customers long ago and has already done the legal, compliance and regulatory legwork as a result. By offering its account origination API to others, BBVA Open Platform  can use something it’s already built - in this case, the account origination API - and charge BudgetWell for the use of it. BBVA Compass will also receive deposits for any accounts that BudgetWell sells.
  • Consumers also benefit in this scenario, though perhaps a little less intuitively. Thanks to the rise of fintechs and technology, consumers today have more choices when it comes to financial services and product offerings than they ever have before. This has been made possible in part because of forward-thinking banks like BBVA that consider it their work to be part of the technology ecosystem and offer their APIs to further enhance it.

With fintechs like the fictional BudgetWell coming on the scene every day, it’s led some to question whether banking as we know it will exist in the future. On that point, BBVA Compass Head of Business Development Pepe Olalla is clear. “When people say the next industry to be disrupted will be banking, and that it will suffer what media or the music industries have suffered, I tend to disagree,” he says.

But, he doesn’t disagree that startups are disrupting banking as we know it today and to stay relevant, banks must adapt.

Olalla: We must look deeper at the value we have and how we can extend it in non-traditional ways to adapt to changing consumer preferences and needs.

“Looking at what you’ve always done in the same way you’ve always looked at it won’t work, and with all the fintechs on the scene, it clearly hasn’t worked,” he said. “Banks that stay stagnant won’t last, which is why BBVA pioneered Banking as a Service (BaaS) early on. We must look deeper at the value we have and how we can extend it in non-traditional ways to adapt to changing consumer preferences and needs.”

To learn more about BBVA Open Platform, visit