IT is undergoing a silent revolution.
New open ecosystems, integrated platforms, and seamless data sharing are changing the way businesses work. They are helping companies to partner, co-create and respond to market needs faster.
At the heart of this revolution lies the humble application programming interface (API).
A recent TalkTech series, entitled Seizing the Transformational Opportunities in the API Economy examined the API impact, how it is about to change the financial services industry (FSI) in Hong Kong, and why it will impact other sectors as a result.
APIs are not new.
Companies created many to connect their systems and allow seamless data-sharing. They also take a step beyond electronic data interchange (EDI) by allowing different software systems to talk to each other.
The problem was that many were closed APIs. It worked well between players who knew each other but had one drawback -- it restricted innovation.
"Your organization is only as good as your ecosystem. You cannot do everything yourself, and the economy is pushing you to collaborate," said Barry Chan, Partner, Financial Services Sector Leader, IBM Global Business Services.
At the event’s panel discussion, Angus Choi, CEO, Jetco Limited highlighted the reasons why his organization is building an open API ecosystem. He noted that the vision is to go beyond a marketplace for financial services.
"We are trying to create a financial and lifestyle ecosystem. This is the ultimate goal and APIs are just a tool to achieve this. We start with the banks, but it is ultimately [a platform] for all industries," said Choi.
The Open API platform, initially designed to answer HKMA's call for Open API Framework, will begin with 15 member-banks participating. However, Choi sees the platform expanding to include other banks, financial institutions and companies from other industries.
One such company was Dah Chong Hong Holdings.
Ravel Lai, the Group’s CIO, saw value in an Open API platform. He noted that such a platform allows them to know their end customers better.
“We are a wholesaler. The key problem is that we cannot directly connect with the end customer. Our customers are actually the retailers. So, if we can connect with the end customer, it offers us a new way of doing business,” he said.
Lai also saw the advantage of building a community around his company’s high-ticket products and cross-selling.
“For example, people buy 3.5 cars in their whole life. This is not a high frequency. Building a community around this item can help to drive sales. In addition, a platform like this helps us to create cross-selling opportunities easily,” he said.
Participants admitted that the journey to Open APIs would have challenges. But they are not technology related.
The biggest is that every company wants to be a platform owner, taking a similar position to Alibaba, Amazon and Google.
“This is a major inhibitor as every player wants to be in the middle controlling the platform or owning the ecosystem,” said Chan, adding that companies to figure out where they fit in the ecosystem.
Another issue is legacy APIs. Many companies need to re-engineer their current APIs to be open. It requires adhering to standards that the ecosystem players need to agree upon, which is not necessarily easy to achieve.
Jetco is working with its consortium banks to create a standard and then evolve the platform. Those with APIs may need to relook at them to see whether they meet the Open API requirements of the platform using a ‘mapper’ according to Chan.
“Essentially, industry players need to come together and talk about a common API standard that can be applied to a particular industry,” he added.
Future is agility
Open APIs’ most significant advantage is agility. It counts in an economy where industry barriers to entry are lowering, and consumers expect better experiences across all their touchpoints.
“It is about creating a co-innovation platform. Companies can exchange [data] much easier and deliver value at a faster time-to-market,” said Chan.
Agility is going to be vital as the banking industry welcomes virtual banks and introduces new services like Faster Payment System (FPS). Technological advantages will no longer matter; what is left is the brand experience.
"I am glad about [FPS] because it has raised expectations. And it will be through APIs that merchants and banks can make [FPS occur] in real time," said Chan.