Open banking APIs are often positioned as a way to accelerate financial services innovation, but simply requiring banks to develop standardized APIs may not produce meaningful new products or revenue. Regulatory requirements can require significant technology investments while giving financial institutions little incentive to explore how APIs might support entirely new business models.
BBVA is taking a different approach by exploring how API technology and existing digital platforms could extend banking beyond the bank’s own channels. Its work with Amazon illustrates how financial institutions might use integrations with large online platforms to reach consumers where they already shop and potentially create new ways to distribute banking products.
In our recent report “The Emergence of API Platforms: Open Banking and Payments Drive New Business Models,” we identified the challenges associated with using simple API specifications as a method of creating open banking and why that approach is likely to delay innovation rather than speed it up.
In fact, we argue that the Open Banking initiative drives banks to build a solution that meets EU requirements at great expense, while also being unlikely to deliver any short term revenue. It may even put smaller institutions at risk.
BBVA Takes a Strategic Approach to Open Banking APIs
This blog suggests that the banking giant BBVA gets it. BBVA has taken the strategic approach and is looking to leverage API technology to deliver an integration that expands its reach and changes the way consumers think about banking. Because the U.S. doesn’t force banks to build a minimum set of APIs, banks here tend to gravitate towards the easiest strategic relationships, which we document in the report to be existing corporate relationships.
APIs Could Extend Banking Beyond Traditional Channels
U.S. banks integrate their banking system to existing corporate clients to improve efficiency and deliver higher levels of service. This blog shows that BBVA has shifted its focus to Retail Banking.
BBVA Explores Amazon as a Banking Distribution Channel
This is a real, regulated bank focused on slowly integrating to the largest online merchant platform to initially sell and then deliver banking products to consumers. That’s innovation and it isn’t accomplished using the APIs defined by the EU:
“The bank’s intention is to move into offering banking products on the platform — an idea still to be fully explored. Amazon has not yet moved into selling financial services directly, and BBVA recognizes that financial institutions must adapt to this way of selling...
…BBVA has a double-pronged objective in using El Celler’s products to kick of its journey into Amazon. First, the bank wants to share its digital expertise with the Roca brothers so they can benefit in selling their exclusive products online. This approach also provides BBVA with a pilot project where it can trial the functionality of the world’s largest e-commerce portal, paving the way for the bank to offer other types of financial products in the future. Currently BBVA already sells close to 60 percent of its products over digital channels. Selling through Amazon would extend online sales opportunities, complementing the bank’s proprietary digital channels.”
BBVA’s approach demonstrates how open banking APIs could become more valuable when banks use them strategically rather than treating them primarily as a regulatory requirement. Integrating financial services with established digital platforms could give banks access to new distribution channels while allowing consumers to encounter banking products as part of other online experiences.
The potential to eventually offer financial products through Amazon also illustrates how API technology could reshape retail banking distribution. Instead of limiting digital banking to proprietary websites and mobile apps, banks could increasingly embed products and services within the platforms consumers already use, creating new opportunities for customer acquisition and digital growth.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
