Banks today are also facing disruptions in their payments business from competitors which provide different experiences, such as Bitcoin, PayPal, Stripe and the micro-lenders. To effectively respond to this, banks need to provide a differentiated customer experience that consumers want, which can be achieved by leveraging APIs.
The last reason why FSIs should adopt an API-led connectivity approach involves the systems layer. Since a lot of FSIs are struggling with very old systems that are difficult to replace, they want to build an agility layer around them to become a composable enterprise. Once these organisations get around these systems, they can get a more agile life that allows them to connect their systems in new ways.
Why are existing IT delivery models failing to keep up with business demands?
The analysts refer to this phenomenon as two-speed IT. IT departments today are faced with increasing business demands, and challenges related to managing the increasingly complex business environments. Most businesses today have 10 times more applications than they did a decade ago as employees from different lines of business, such as marketing and sales, are increasingly using Software as a Service (SaaS) and cloud apps to improve the customer experience. Moreover, they are also faced with the challenge of managing different devices and channels. All of these represent a different demand on IT, which the IT teams can't keep up with.
To overcome this challenge, IT teams need to focus on the front-end of the business that is very close to the customer experience, and make that as agile as possible. That's the high speed mode that the analysts talk about.
The low speed IT refers to the back-end. As an IT organisation, what you're concerned about is that you maintain control over governance and data, and free up the business to create its own experiences and applications in a line of business IT functions. There are some organisational issues here as well that will help businesses respond to this issue of increasing business demands.
What are some of the business trends that are driving FSIs to adopt an API-led connectivity strategy?
There's no question that all the key trends that we talk about in relationship to IT are very much driving this API-led connectivity strategy. Forces such as mobility, social networks, cloud, SaaS apps and big data — are forces of innovation as well as disruption.
It's easy setting up a disruptive business today. You can get the infrastructure via the cloud, and subscribe to a number of SaaS applications for a few thousand dollars a month to run your business. You can then get a couple of smart developers to develop your APIs, and suddenly, you've created a business as a platform that is ripe to disrupt the traditional competitor.
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