Rod Drury, the CEO of cloud accounting software Xero recently introduced their concept of the ‘financial web’ which they envisage will not only be the next revolution in SME financing but more broadly will herald a new wave of startups that will completely transform the way businesses function.
Boasting a client base of over 10 percent of businesses in Australia and 25 percent of businesses in New Zealand, it is no surprise that National Australia Bank (NAB) announced in late 2015 that they have linked to Xero’s open API to tap in to live, balance sheet data to approve business loans faster. More recently foreign exchange provider OzForex (OFX) announced a partnership to connect their international payments engine to Xero creating straight through processing for their SME clients and with other working capital lenders such as Moula also integrating to their open API.
But it is not just lenders that are now connecting to Xero’s financial data. The cloud accounting system now has an ecosystem of over 400 ‘add-on’ product companies that have built their businesses by connecting to Xero’s open API in turn creating a web of interconnected platforms that allow businesses to become more efficient and reduce manual processes.
API’s are certainly not a new concept but have come a long way – once a tool for businesses to connect to software providers they have now evolved as a key unique selling proposition for a new wave of highly successful tech businesses such as Salesforce, Amazon, and Stripe – all examples of businesses built on connectivity – a trend that is only going to continue. Think about Google Maps and Paypal who make their API available to businesses all over the world and Gartner predict that 75 percent of Fortune 500 companies will have an open API in the next five years.
In a recent article the guys from CurrencyCloud talked about this revolution for software businesses as well as Finch companies where they argue the way software is used by businesses has fundamentally changed – businesses now consume it by blocks, aggregating a series of API’s to deliver a fully complete, end solution. Take Salesforce for example which have half of their business being delivered via its API.
This is never more important in the Fintech space where banking is essentially a series of processes meaning API’s allow Fintech businesses to be a specialist in one area but then giving them the ability to connect to a whole ecosystem of other similar businesses. The result for the end consumers or business is the ability to connect data once held in different systems instantly create streamlined processes and allow them to focus on their core business rather than wasting time creating internal processes to patch together different software providers.
With banking being such a core part of any business, the question now is will the big banks open up their own API’s to developers and innovative Fintech businesses, whilst at the same time being fully aware that of the disruption that these businesses pose to their business models. Whilst these Fintech businesses are desperate to gain access to the bank’s huge customer bases, in doing so it is like inviting the burglars to have a look around the house.