APIs – the code to success in securities services
How are APIs becoming an essential component of our service delivery, data strategy and client communication in securities services?
Although API penetration in the securities services industry was historically lower than other financial industry sectors, they present a significant value proposition as a means to innovate and offer clients real time visibility, value added services, aggregation, and benchmarking.
Ahead of the launch of a number of solutions over the coming months, we discuss three specific areas where APIs can deliver significant benefits.
Enhancing process efficiency
Despite steady developments in automation across the industry, there are still some securities services processes that are handled manually. Advances have been made through the application of robotic process automation (RPA) and machine learning but there are still opportunities for APIs to facilitate system-to-system STP, which would reduce the number of breaks, lower processing time, and deliver a better client experience.
APIs are fundamental components of a broader digital strategy, replacing monolithic infrastructures with micro-services that support an omni-channel experience. They are essential for the efficient transfer of both internal and external data from securities services providers to their clients.
There is also tremendous potential for settlement exception management in the context of the Central Securities Depositories Regulation (CSDR). Such solutions depend on access to large sets of data, which need to be kept up to date in as close to real time as possible – standard APIs play a vital role in their success.
At BNP Paribas Securities Services, API store and infrastructure solutions went fully live at the end of 2021 with cash and custody APIs released. We are also developing solutions in a number of other areas including fund administration and distribution, and foreign exchange.
Benefits of these APIs include facilitating a self-service model where the client has access to information when and where they want it. Improved process efficiency removes manual processing, minimising email/phone traffic and limiting potential for error. Meanwhile API connections enable an ‘open banking’ model that improves connectivity between stakeholders, supporting the creation of new business models and sources of revenue.
Additional benefits include the ability for multi-banked clients to pull information from all the providers that had developed the same APIs in real time. To maximise the benefits of APIs, clients need to ensure all their providers are part of proposed industry-wide API standards when possible (such as PSD2 or ISO 20022 data dictionary), as this will allow them to develop just once and deploy across all their providers.
Automating client communication
APIs are already enabling services such as virtual agents and self-service. However, they have the capacity to deliver even better services and data insights. Firms across the securities services industry have invested in the key data building blocks (e.g. data governance, quality, security, lineage). APIs can unlock this value by providing access to data in the ways our clients want to consume it.
Digital tools clearly facilitate more efficient collaboration, not just between machines but also person-to-person and person-to-machine. APIs are one of the key components in implementing a self-service model that supports efficient person-to-machine communication – chatbots are an established mechanism for providing automated data access in many industries and are increasingly widely used in securities services.
The combination of virtual agents and APIs guides clients during their interaction with their securities services provider, using Natural Language Processing (NLP) that allows them to ask questions and leveraging APIs to generate and deliver the response.
Future-proofing business models
APIs can also be used to future-proof the securities services business model. We have seen how they can help directly deliver services – in an environment where platforms are becoming increasingly influential they can also provide the speed, agility, security and interoperability of data exchange required to support partnerships between incumbents and fintechs.
A good example of this is the possibility to seamlessly consolidate the services of traditional custodians with those of new actors such as fintechs. Traditional providers are complementing their core services by leveraging the agility of fintechs to develop value-added services.
One Asian fund manager client has referred to the value of our proactive approach in designing new solutions such as APIs, saying these solutions have further increased the efficiency of their processes and services.
Greater collaboration between asset servicers and their clients and partners could help to move the industry towards a platform-model based on open-data architecture; the use of APIs and common data interface standards; and inclusion of third party solutions.
In the future data marketplace, clients will be able to consume their data via APIs. Machine-to-machine is the most efficient channel because it means clients can take in data from our systems in real time and ingest it into their internal systems.
The benefits of the technology will be fully realised through an API standard that also addresses issues around data governance. With this in mind, we have been working closely with SWIFT and other custodians to define standard APIs for settlement data based on the ISO 20022 data dictionary, and we are also compliant with other requirements such as PSD2 for some of our APIs.
This work will also ensure greater consistency in the sharing and use of data and reduce scope for misinterpretation – which is vital if the securities services industry is to fully leverage the benefits of API technology.