MICROFINANCE PAPER WRAP-UP: “API Deployments in Inclusive Finance: Recommendations to Optimize API Deployments Between Banks and Fintechs for Financial Inclusion,” published by Accion’s Center for Financial Inclusion (CFI)

By Dan Kleinbaum, published by the Center for Financial Inclusion, March 2020, 24 pages, available at https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/03/CFI55_API_deployments_FINAL.pdf

Application programming interfaces (APIs), which can facilitate communication among various digital systems, can help integrate “nimble, iterative and product-oriented” financial technology (fintech) firms with traditional financial institutions that have steady customer bases. This can allow for a symbiotic relationship, through which the low-income customers of brick-and-mortar financial institutions gain access to innovative products more quickly. This report focuses on examples of API use by small and midsize financial institutions with limited resources to roll out new technologies.

Based on a literature review and interviews with two dozen leaders of traditional financial institutions, fintechs and API implementers, the authors find that the number of failures among API deployments vastly surpasses the number of successes. Successful API partnerships typically address the needs of customers that are middle- or high-income, as banks know these customers better.

The report recommendations are as follows: (1) build APIs tailored to customer needs, as any new product would be; (2) consider APIs within the financial institution’s broader technology strategy to allow the institution to maximize the potential benefit of the API; (3) evaluate compliance and regulatory risks early in the planning process to minimize the use of resources on projects that are unlikely to succeed; and (4) hire teams to build, launch and manage APIs specifically for this purpose because “having non-technical people at the helm and deploying APIs prematurely ha[s] killed or stalled numerous API-enabled partnerships.”

By Anna Gravois, Research Associate

Sources and Additional Resources

Accion CFI report
https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/03/CFI55_API_deployments_FINAL.pdf

CFI homepage
https://www.centerforfinancialinclusion.org

Accion homepage
https://www.accion.org

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