Why Mastercard, Atom Bank and others have adopted the API economy

The API economy will be a new engine for digital innovation and growth, argues MuleSoft founder Ross Mason

Everyone's chasing digital transformation.

It's no longer nice-to-have, but essential to every organisation's future growth strategy.

However, as digital strategies mature, IT leaders are realising it's important to look beyond the own four walls of their own organisation to maximise business advantage.

Today, it's impossible for one organisation to have all the best ideas. Rather, the best way to succeed is to share capabilities and build on the innovation of others while allowing others to build on your innovations.

This has led to the emergence of the API economy, as organisations expose their digital capabilities and tap into the resources of others to drive a mutual advantage.

There are already nearly 20,000 publicly available APIs that organisations can access, but far more are being created within private IT environments. In the future, the success or failure of organisations will be measured by how effectively they tap into these building blocks and participate in the API economy.

To do so, they must not only embrace new technological approaches, but also a new way of thinking about how they engage with internal communities, partners, customers and even competitors.

A new mindset

At a basic level, the API economy is the sum of all exchanges of value through APIs.

It's about organisations realising they can gain more from opening up their capabilities and working alongside others to create broader value chains, rather than trying to own the entire customer journey. This requires not only a rethink from an IT perspective, but also a mindset change about the nature of competition.

Organisations need to see disruptive digital players not as rivals eyeing up their future growth plans, but as potential partners within a bigger ecosystem.

For example, it's not possible for one bank to be everyone's favourite. With productised APIs, banks can reach more consumers than ever before, but this can be achieved by working collaboratively with new fintech firms that are forging their own customer relationships.

That's the value we're talking about here. Driving success by being part of more products and services used by consumers, even if they happen to be outside the organisation's normal demographic or traditional offerings.

Mastercard, for example, has embraced this strategy by creating a platform of APIs that allows others to access and build on its core services and capabilities. For instance, the Mastercard Travel Recommender enables travel agents and transport companies to tap into its various APIs to offer personalised recommendations for restaurants, attractions and activities based on customer spending patterns.

The API economy

Once organisations have decided to participate in the API economy, they need to set out to expose the internal capabilities and data they want to share via APIs. These APIs will be for internal use only to start with, but companies often get comfortable opening up some of these internal APIs as third-party services.

However, it's also important to remember that passive participation isn't enough. To find more advantages through this new economy, organisations must also look to consume the capabilities exposed by third-party APIs, building on the innovation of others to drive their own growth.

The way to achieve this is to expose APIs within an application network that connects the organisations participating within the API economy. This provides a simple and effective way of making digital capabilities discoverable and re-usable, so that new products and services can be created, plugged-in and unplugged quickly and easily.

It is also essential that the assets connected to the application network drive full neutrality, enabling access to all systems, data and functionality regardless of the underlying platform, whether they be on-premises or in the cloud.

New business models

As the API economy continues to gather momentum, we're now entering the third wave in an era where new business models are beginning to emerge. To understand the significance of this, it's helpful to look back at the two waves we've experienced so far.

The first was driven by giants such as Google, connecting information. These companies made their APIs available for users to sign-in to other services. How often do we see "Sign in with Google" when opening a new app? This enables Google to see where its users sign in from and what they're doing.

The second wave of the API economy saw companies building apps enabled by APIs, which offered things like embedded payments that streamlined the customer experience, provided by companies such as PayPal. This era also saw the emergence of API-first companies, where their product is the API, such as Stripe and Twilio.

The third wave is taking the API economy somewhere even more advanced, where traditional non-tech businesses are starting to view the API itself as a new business model - so it's designed, deployed and managed like any other product.

Some will be free, some charged at a premium, some may be part of a subscription, and some will be pay-per-use. Third-party organisations will build services on top of these ‘products', just as the businesses that created them will use other companies' APIs to extend their own capabilities.

The API economy at large

The open banking revolution is a great example of the third wave of the API economy in practice. Mandated by the European Union's Payment Services Directive (PSD2), a historically closed sector is being forced to open up on an unprecedented scale, enabling services like white-labelled banking, where new players can use an established bank's platform and data to offer their own services.

One company capitalising on this new API-driven ecosystem is Atom Bank, a mobile-only bank that has built an application network to tap into the API economy. This has enabled Atom Bank to roll out new products and services quickly and easily in response to customer demand.

For example, Atom Bank has automated mortgage processes such as valuation, conveyancing and credit scoring, making the application process as painless as possible for customers.

The bottom line is that the API economy presents a huge opportunity for those that are prepared to seize the initiative. Organisations must decide whether they want to be a part of a wider ecosystem, integrating into new value chains to drive growth, or whether they want to sit back while digital innovators forge ahead.

Ross Mason is founder of integration software specialist MuleSoft. He can be contacted via Twitter or MuleSoft's corporate website

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