Over the last two decades we have seen accelerating proliferation of electronic interchanges between the primary partners in transactional value chains. Initially these Electronic Data Interchanges (EDI) as they were once called were only warranted by substantial and repetitive bilateral exchanges of information supporting targeted processes between specific business partners.
What started with technically tailor-made, proprietary and exclusive exchanges has now transformed into almost every party or person exchanging data with electronic means with others even if the exchange between them is ad hoc and non-repetitive in nature. We have been moving form structured relationships as the basis for electronic exchanges to unstructured, parallel to how the Interconnected networked economy has transformed. See also: Not B2B or B2C but structured vs non-structured.
In this development the technology and platforms used – both in corporate and at a later moment in the consumer to corporate environments – have changed dramatically. Large scale innovation of networked value chains has emerged as a consequence. The latest developments to link-up parties is the use of the Application Programming Interface (API).
An API specifies a software component in terms of its operations, their inputs and outputs and underlying types. Its main purpose is to define a set of functionalities that are independent of their respective implementation, allowing both definition and implementation to vary without compromising each other. In practice, many times an API comes in the form of a library that includes specifications for routines, data structures, object classes, and variables.
Often APIs are created for single purposes e.g. a specific call for data. An API can be assigned to and hence withdrawn from specific parties.
The technical concept of application programming interfaces (API’s) and the typical business models in which they are being used can be envisioned to be used in a wide range of services, interchanges and infrastructural propositions by banks individually or communities of banks between themselves, with other parties involved in the processing of payments and with – last but certainly not least – with their customers.
While API is only a technological way of dealing with interfacing with third parties it enables new ways of creating added value for customers and strengthening the supportive infrastructure by creating new opportunities for collaboration with third parties.