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The Rise of the Interconnected Digital Bank

A new innovation called the API (application programming interface) economy is enabling organizations, including banks, to build new services far more quickly and easily than in the past. Thanks to APIs, digital integration can be achieved as easily as a click of a button. This presents a unique opportunity for banks to build new digital experiences and offerings for their customers by digitally bolting together their own services with those of partner organizations to provide customers with a far richer set of experiences than they have been able to provide in the past. Furthermore, a number of leading banks are using this innovation to share their data and services with the public, creating an open platform that will enable a global team of developers to build new applications on top of the banks’ infrastructure. This will make it possible for banks to embed their services into the fabric of the next generation of mobile applications. However, this innovation also poses a number of threats to the banking industry. Firstly, digitally providing information on banks’ products could lead to product commoditization. Secondly, as the API economy also blurs the lines between financial services and other industries, it also breaks down the barriers to entry for non-banking institutions, which will raise key questions for banks about what it means to be a bank and what their business model should be in this new environment.