Magazine article American Banker

Slow API Adoption Is Dragging U.S. Banking Down

Magazine article American Banker

Slow API Adoption Is Dragging U.S. Banking Down

Article excerpt

Byline: Nabeel Siddiqui

The United States has long had a reputation as a banking and financial juggernaut and leader of innovation. But unless American banks embrace open banking, they will lose the title.

While there is still no larger market, the U.S. has already begun to fall behind other countries when it comes to consumer finance. For example, even though payment app services like Venmo are catching on fast in the U.S., widespread adoption of instant, real-time payments is still trailing that of other countries, where many citizens may have never seen a paper check before. That is something still foreign to many Americans.

American banks' slow adoption of application programming interfaces is one reason the world's largest economy has stumbled in advancing digital banking. Other countries, like the U.K., India and Australia have been actively pushing open banking systems for some time. In the U.K., Britain's Open Data Institute estimates that each British bank has spent around £1 million ($1.7 million) to create open APIs, for instance. U.S. banking, meanwhile, does not inherently support API integration. Integrating parties into the bank technology infrastructure is a slower process that ultimately hampers progress.

When we look back at the financial industry's peaks and valleys of progress, we tend to forget some time has passed -- roughly three decades -- since many financial institutions put a lot of enterprise legacy infrastructure into place. At the time, the lack of solutions available on the market and demand for IT infrastructure led to banks relying on proprietary software -- in-house legacy software created by one company, only for that company. …

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