APIs in securities – an enabler for transformation?

API technology is not new, but after years of development and testing in real-world applications, it is now proving sufficiently robust for increased use in financial services. Juliette Kennel, head of securities and FX markets at SWIFT, looks at how APIs can be deployed effectively in the securities industry.

Application programming interfaces, (APIs), are transforming the way business is done. For instance, Uber integrates a combination of services from third party providers. Map and location services from Google combine with payment services from PayPal and card companies to create an entirely new way to connect cars and drivers with passengers and to collect payments. 

Now financial institutions, payment service providers and fintechs are harnessing this technology too and using it to expose business data, functionality and services to their customers. APIs are creating new opportunities to deliver financial services in highly efficient ways that satisfy evolving customer expectations. 

A report published this summer by Swift and the Boston Consulting Group (BCG) found that interest in APIs is rapidly growing in the post-trade area. Over the course of 2018 alone, awareness of APIs among asset managers increased 26 percentage points to 72%, according to a BCG survey. The growing commercial interest is driving more pilot schemes and use cases.

APIs are well suited to help the securities servicing-industry, which has to contend with numerous and diverse asset types, complex information exchanges and increasing fee pressure. We have identified four areas in particular in which APIs can benefit the industry. Firstly, and most obviously, cost – the efficiency and savings made possible through automated data exchange will be significant. Secondly, they will allow for real-time visibility of information such as settlement status and intraday risk – this way, clients can get the information they need throughout the day as they need it. Thirdly, APIs will allow for the value-added services – such as enriched data and analytics – that customers are demanding. Finally, the adoption of APIs will create and make available operational benchmarks to help institutions compare performance with their peers.

Adoption of APIs in the securities servicing industry has been slower than in other areas of financial services in part because it has lacked a regulatory catalyst, such as the EU’s EU’s revised Payment Services Directive (PSD2) which has driven the use of API technology. Though interest in APIs is rising, differing levels of familiarity with the technology and uncertainty over how it will be deployed have prompted some to take a ‘wait and see’ approach, further slowing adoption of APIs. 

Nevertheless, we expect progress as the green shoots evidenced by various pilots and initial commercial offerings fulfil expectations. By mutualising foundational API infrastructure, aligning an approach to set standards, and pursuing networked rather than point-to-point solutions, the securities servicing industry stands to unlock significant collective value generated by greater use of APIs. 

While distributed ledger technology (DLT), cloud and robotic-based solutions frequently grab the most attention, API technology – because of its maturity and myriad uses – has the potential to be the most powerful enabler of innovation in the post-trade industry, just as it has been in payments and other areas of banking.

This year’s Sibos will feature sessions and speakers looking at how APIs are transforming financial services. In London for the first time, the world’s premier financial conference is hosting a range of sessions of interest to professionals working in securities. Take a look at www.sibos.com for more details about the exciting programme we have lined up.