The role of APIs in the unbundling (and rebundling?) of financial services

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Constantly reinventing the wheel is a barrier to innovation

We’ve added “aas” to so many functions and products, from Software to Platforms to Backend (there’s some joke to be made here, but I’ll refrain…). If you started building products or services in the last few years (like me), you might take for granted that you don’t have to reinvent the wheel every time you want to access basic infrastructure and functionality; you probably rely on AWS for hosting, and use a CRM in the cloud to keep track of your customers.

But when it comes to , building products & services is still largely on-premise, and most product managers and developers are reinventing the wheel.

Development and product teams can focus on what they’re good at

Let’s say you have a great idea for a new savings app based on behavioral economics. To build an MVP and get your first 100 users on it, you’ll have to have a mechanism to move money and you’ll have to be compliant with KYC and AML regulations. Neither are easy tasks, and neither one is core to your product or competitive advantage. They’re simply table stakes for getting off the ground.

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APIs are the way to make viable financial ecosystems and the key to making Financial-Services-as-a-Service possible. A variety of well-designed, easy-to-integrate APIs will let you launch faster while staying focused on your product and customers. You may integrate Plaid, Dwolla, Twilio, or some combination of the three. Think of the developer hours you’re saving by not building those functions yourself.

Big financial institutions can become platforms (the American dream!)

On the other side, big financial services companies are also getting into APIs, and for good reason. They don’t just want to use the services, they want to be the platforms upon which those services are built and distributed. They want to be ecosystems. Be Apple, not Tidal.

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Without APIs, , and financial institutions are siloed. Few users want to process a payment through their bank or make a trade through an archaic brokerage online when they can use Venmo or Robinhood. But banks have trouble building this themselves — for one thing, as one of my favorite VCs put it recently, “banks think they’ve hired developers, when in fact, they’ve just built IT departments”. By embracing APIs, they can take advantage of innovation without doing it all themselves, by opening themselves up.

Open platforms and initiatives are allowing bigger financial services institutions (e.g. BBVA, Capital One, Barclays) to have innovative products and services built off of their platforms, bring exciting experiences to customers, and get talented developers connected to their banks without completely renovating their core banking systems.


 is the cofounder and CRO at Alloy, which offers an identity and onboarding API for financial services companies. To send feedback, questions, or simply connect with Laura: Twitter, LinkedIn, or email [email protected].