In the Question of Data Control, APIs are the Answer

Abracadabra, Watch Your Data Disappear

Whoever said ignorance is bliss obviously never unknowingly shared all their data. As we mentioned in a previous post, consumer data is being screen-scraped into the ether and this creates so many issues around control and the assumption of privacy. Once your data is scraped, it’s gone. Neither the bank or institution, nor the end user has any control.

The problem, as ever with the tech industry’s teeny-weeny greyscaled legalise, is that the people it refers to as “users” aren’t genuinely consenting to having their information sucked into the cloud for goodness knows what. Because they haven’t been given a clear picture of what agreeing to share their data will really mean.

Miss Jackson if You’re Nasty

It’s all a question of control. And APIs are the answer. They offer banks and FIs the ability to control what pieces of data and how much are grabbed by a permitted 3rd party. For example, at TradeIt—from some of our brokers’ API—we see only seven days of transaction history, while others might show 30 days. Typically no one provides more than 90 days but the depth of history varies. In addition, for things like an order blotter, some brokers only provide the current days’ orders. These smaller pieces of data ensure less is shared, though what is shared is timely and relevant.

You Get My Data and You Get My Data, Everybody Gets My Data

With screen-scraping, once you provide your ID and password to the 3rd party, their bots do the scraping and can grab anything that’s available, including your transaction history and all of your accounts under that single login. For some banks or brokers—if the broker is part of a larger financial institution that offers a diverse product set—that could be your brokerage account, retirement account, mortgage, even credit card information. Most end users likely don’t realize that once they give the screen-scraper their login, they have it, and they can and will use it until the password is changed. What’s worse most of the screen scrapers don’t have trademark rights to the logos that are on their service integrations, therefore falsely leading the consumer to believe the institution approves it. In the meantime, they’ve still grabbed that data and it’s gone…to who knows where.

APIs Create a Goldilocks Solution, They’re Just Right

In contrast, most APIs are programmed to call for specific account balances since these services and endpoints are more distinct and inherently control more access to just the needed data. This is why the European Banking Federation’s position is that screen-scraping is an outdated, first-generation technology that should be replaced by APIs, which it sees as a more secure way of enabling direct access to customer data for third parties.

Not only do APIs offer a more tailored solution where you essentially get only what you need, they create a huge potential for innovation. As we demonstrated in a previous post about your data being open for business, companies like Fidelity are already showing consumers who has access to their data and allowing them to control whether or not that’s ok with them.

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In Tech We Trust

Brokers need to push themselves to invest in APIs. Ever since the invention of the FDIC, FIs have been associated with trust as it relates to consumer’s money. The theory with bank robbery was that they aren’t hurting anyone since the money is insured. Except now with screen-scraping, we are getting hurt…with our privacy…or lack thereof.

As technology evolves and allows for endless possibilities, investing in methods to engender trust and yet that also support the new ways individuals want to interact with their money, track their wealth and/or use tools for better financial decisions, is vital. Brokers and FIs need to enable that, to securely open their data with controls to prevent misuse or even breaches. This is what will create real trust with their users.

Don’t Build a Wall

Firewalls and detours aren’t the answer. It’s not about closing things off, it’s about opening them up. With the new sharing ecosystem, and with millennials having more trust and more interest in tech-driven brands, FIs need to work to remain relevant. In order to do this, you need to be an active member of the ecosystem and invest in technology that supports these behaviors.

Because, while users may be content to share some of their personal info in order to use your service now, it’s only a matter of time before they realize just how much and possibly decide it’s not worth it.

“We have consistently warned our customers about privacy issues, which will become increasingly critical for all industries as consumers realize the severity of the problem.” – Jamie Dimon

Are they really getting what they signed up for, or worse, paid for? You need to provide comfort and control to your user. If you don’t, they won’t tick that agreement box and they’ll move on to someone who can.  

The Evolution of Value Chain and Porter’s 5 Forces

Millions of eager MBAs populate the executive suites and boardrooms of top companies around the globe, and the vast majority were indoctrinated in strategy classes with Michael Porter’s Five Forces and value chain analysis. These value chains have served corporations as they examine vertical integrations, mergers & acquisitions and the strategic fit of business lines since the Industrial Revolution.

Screen Shot 2018-04-11 at 8.59.39 AM.pngExample: Linear value-chain which offers one direction for business flow only.

This traditional model is no longer useful or practical and the technology revolution of the last 30 years is forcing companies to re-evaluate linear value chain analysis in favor of a “constellation” approach to building businesses.
Untitled123.pngExample: Constellation approach using TradeIt to showcase the potential of a living breathing value ecosystem that flows to all entities.

As we see in the TradeIt model, the relationship between buyers and suppliers now features a “big bang” view of the ecosystem—partners that support each other and need each other to grow, branching off in every direction.

So why is this beneficial?

The TradeIt model would not be possible without APIs. APIs allow companies to securely work with each other through technical channels in order to focus, build and scale without the same linear approach as historically conceived. But we’re getting ahead of ourselves. First, a refresher…

Five Forces

First described by Michael Porter in his classic 1979 Harvard Business Review article, Porter’s insights started a revolution in the strategy field. A Five Forces analysis can help companies assess industry attractiveness, how trends will affect industry competition, which industries a company should compete in—and how companies can position themselves for success.

Essentially Porter built a framework for understanding competitive forces in an industry and how those drive economic value among the industry players. Today we’re still trying to understand how to drive value, but what’s clear is that it’s no longer through a linear value chain. Instead, we drive value through a platform model where you have contributors owning different pieces, therefore making the sum of the parts greater.

Evolution of the Value Chain

“The value chain describes the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer.” Nowhere does it say the chain has to be linear.

Enter the API

APIs are revolutionizing traditional business alliances and partnerships through scalability, flexibility, and fluidity.1

When companies share APIs, the world expands. Uber relies on Braintree for payments, Google integrates Uber into its map feature, and the list of interdependent API-driven technology businesses becomes more and more apparent.

Similar to the relationships between Uber, Google and Braintree—which are all focused on delivering a service to an end user—in finance, Cross River Bank allows companies like Affirm, TransferWise, and others to be free to build client-facing tools and services without having to do the core banking functions that often slow large incumbents. The ‘big bang’ approach to an ecosystem allows innovative service providers to enter a space with one “killer app” or a new tactic to solve a pain point.

Power in Partnerships

Large incumbents, where all the technology and related services are all under one roof, may not be able to move as quickly due to silos, legacy systems and/or risk and compliance requirements. The keys to this new value chain approach and the ecosystem are the partnerships and the ability to work together in new and innovative ways to meet the end user’s needs.

The visual below shows how TradeIt acts as a hub between supply and demand (brokers vs publishers) and how other partners come into the equation with ancillary and related services.

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This type of model not only offers much more flexibility for other players, it also opens the door for additional revenue streams and increased profitability. By creating value at every touchpoint, from broker to publisher and supplier to distributor, the ecosystem will only continue to expand and grow…to the benefit of everyone.   


1Bala Iyer and Mohan Subramaniam, “Corporate Alliances Matter Less Thanks to APIs,” Harvard Business Review, June 8, 2015.