Growth by Participation: How we can Build Bigger and Better Product Ecosystems Using APIs

by Seyi Akinkugbe

When Apple launched the iPhone in 2007 to much fanfare, the Apple App Store was virtually non-existent. Steve Jobs had considered keeping control of app development in-house, in other words, limiting the design and development of apps on its range of device platforms to Apple’s internal teams.

Seyi Akinkugbe

Fortunately, that approach was shelved in favour of an open app store that allowed anyone to imagine and build to their heart’s content. As of Q2 2020, there are 1.82 million apps available on Apple’s App Store and 2.7 million on Google Play with billions in revenue generated.

The explosion and growth of apps available for devices could never have happened with a closed house. Today you can think of just about any problem, task or activity and be sure there is an app available for it.

This ecosystem approach of allowing players of all types to contribute to production has powered the kind of rapid scaling of digital products and services at unprecedented levels. An ecosystem that produces content and digital assets to support mobile devices was first pioneered by NTT DoCoMo in Japan in the early 2000s.

Their range of mobile devices -powered by JAVA- was actually the first to enable add on content (apps) onto mobile devices, this allowed NTT to cater for various types of customer use cases it on its own could never have done. NTT was already allowing its customer's purchase and download apps long before smartphones and apps were common elsewhere.

Major industries such as the financial services industry are starting to see the merits of this approach with some countries and regions setting in place measures and even regulation to support the development of technology-powered financial products and services by third-party players.

Open banking (UK) and PSD2 (EU) are examples of an open approach that have as a basic assumption, the availability of a diverse range of third-party players able to deploy all types of financial products to address a myriad of customer use-cases and progressive thinking coupled with the willingness to innovate at levels where central policy and regulations are made. Just as it was impossible for Apple to determine all the types of apps its customers could possibly want, the same goes for the banks.

Personalising products and services is critical to keeping customers, something which banks have struggled with, and allowing content creators to extend to third-parties is perhaps the most efficient way to ensure customers remain engaged with meaningful and highly relevant content.

API’s are a key part of creating an ecosystem that is powered by third-party mobile applications, they are if you will the foundation on which value in services and products will be created.

A 2015 article published by CGAP identifies reasons for mobile money operators deploying open API’s. These reasons are also applicable to banks and have been adapted accordingly:

APIs can increase the speed of development and deployment of new products whilst conversely reducing costs by allowing for collaboration between ecosystem players. This in turn leads to higher transaction volumes, since the pull on bank services is directly proportional to the number of third party products that rely on them.

Hence the more third-party products available for customers to download and use from a financial app store, the more API requests (for instance) these apps will make for various bank services. Higher transaction volumes will invariably generate large amounts of data which can be very useful and provided the bank in question has undergone a digital transformation, the data is sure to provide insights into customer behaviour and spending patterns.

For the banks in particular, as concerns around profitability are a constant worry, open APIs will facilitate the emergence of new revenue streams as new products offering combined with new business models to offer customers ever more engaging and satisfactory products will be built by thousands of creative minds driven largely by the economics of profitable participation.

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