APIs are not a new topic, but they remain an important one. The volume of data in financial markets continues to grow and market participants increasingly seek to obtain near real-time data. As such, developing the right channels to access data has become paramount.
In this article we document what APIs are before delving into how relevant they are for the finance industry.
What are Application Programming Interfaces (APIs)?
An API is a data sharing channel which can complement other channels (e.g. SFTP[1], MQSeries, web portals…). They are essential for the efficient transfer of both internal data inside organisations and external data from providers to their clients. Through APIs a custodian can, for instance, exchange information such as trade statuses, settlement confirmations, intraday balances, and more with its clients.
APIs are often seen as a standard for the rapid and direct exchange of data between two systems. They differ from other channels in some notable ways:
On-demand data
In contrast to SFTP (currently the most used data channel in the securities services industry), which relies on scheduled pushes of data (e.g. at 6pm every day), APIs are a pull data sharing channel, delivering the latest available data on-demand. This allows to get closer to the provision of near real-time data. Not only can APIs support the time-sensitive nature of certain data, they also act as key business enablers.
This technology enables open banking strategies by improving connectivity between industry participants, hence supporting the creation of new business models. APIs can provide the speed, agility, security, and interoperability of data exchange required to support partnerships among established market players and fintechs. A good example of this is the possibility to seamlessly consolidate the services of custodians with those of new actors such as fintechs.
As enablers, they also unlock the potential of other technologies such as artificial intelligence. Leveraging Natural Language Understanding (NLU) and Natural Language Processing (NLP), our virtual agent NOA can provide timely answers to clients, providing information on their securities services activities. NOA retrieves the requested data through APIs, which guarantees time-relevant answers and a clear picture of the situation taken at the moment of the request.
Customisability
APIs are also highly customisable. Users can retrieve the data however they want, with precision, for a dedicated set of data. APIs can be leveraged to build self-service models where the user has access to the information they want, when they want it. This, in turn, can result in improved process efficiency, removing manual processing, minimising email/phone traffic and limiting potential errors.
In this regard, they are especially potent for multi-banked clients as APIs can help overcome the challenge of accommodating multiple data providers and systems. With the ability to seamlessly pull the data from multiple systems into their own, financial institutions can for instance capitalise on consolidated in-house reporting from the get-go.
Implementation speed
Lastly, APIs are often seen as faster to test and implement compared to other system-to-system channels. While they do require a development phase on the provider side, and an implementation phase on the client side, these processes are facilitated by industry standards. APIs rely on WEB technology, often capitalise on public documentation and they can be tested through common sandboxing methodologies.
The omnipresence of APIs
Due to these benefits, APIs are omnipresent and can apply to many use cases. You may not realise it, but you probably rely on APIs daily.
Do you regularly check the weather on Google? Google is not a weather company, yet they can give you this information in real-time by fetching it from the relevant databases thanks to APIs. Do you use Citymapper to plan journeys? Citymapper is not the underlying transport company, yet they can provide you with time-sensitive information – through APIs. APIs act as very powerful bridges between databases, systems, and applications all around us.
Going back to our industry, you may not have any business-to-business external APIs in place with your providers, yet you are surely indirectly leveraging this technology by working with them. At BNP Paribas, we have built internal APIs to gain in operational efficiency, in turn enhancing the level of service we can provide to our clients.
APIs in the securities services industry
So, where do we stand in the securities services industry?
Historically, utilisation of APIs has been lower in the securities services industry than it has been in other financial industry sectors. Although internal APIs are widespread, external APIs, linking providers and clients, are less widely used.
There are plenty of use cases however – and they are growing in number.
We have mentioned open banking models and their need for efficient connectivity. To comply with some regulatory requirements, such as the Settlement Discipline Regime of the Central Securities Depositories Regulation (CSDR), it is critical to be able to access large sets of up-to-date data in as close to real time as possible. Similarly, market changes such as the move to T+1 settlement in the US encourage more efficient data sharing. Indeed, with the reduction of the settlement window, near real-time access to your trade statuses and settlement confirmations could be of value.
And the use cases go beyond these recent trends. External APIs can, for instance, be very useful in relation to cash management.
Let’s imagine that you are a financial intermediary relying on your own reporting portal and currently receiving data via SFTP. You encounter oversight issues as you don’t have a near real-time view of your cash-related data, resulting in sub-optimal liquidity management and increased risk. This situation could potentially be remedied using APIs, allowing you to avoid potential overdraft positions, to verify your account balances with ease and to make better-informed investment decisions, amongst other things.
APIs at BNP Paribas
Relevant use cases such as these are what we have in mind when developing APIs to complement the channels through which we communicate data to clients. Our goal is for clients to have access to the right channels to overcome their challenges.
We have been building APIs leveraging Google Apigee in order to attain a degree of standardisation and facilitate adoption. Standardisation also ensures greater consistency in the sharing and use of data and reduces the scope for misinterpretation – which is vital if the securities services industry is to fully leverage the benefits of API technology.
We are sharing our APIs with clients through an API Store. It includes API documentation and information, allowing prospective users to understand the purpose of the API and plan for the integration of live APIs.
We already have APIs available for cash account information, settlement statuses, securities accounts holdings and more. We will continue to develop APIs as they act as a powerful complementary channel that is well suited to solve some of our industry challenges.
[1] SFTP : Secured File Transfer Protocol