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CHAPTER 5
Application Programming Interface (API)

Why Create an API?

What does digital banking look like in the 2025, and what does it mean to be a true digital bank versus just another bank with an Application Programming Interface (API)? How do banks keep from being disintermediated in this new world? After all, if financial institutions are forced to open up their systems to literally anyone, how do they retain relationships? How do they keep from becoming nothing more than an engine that processes account information, while leaving the digital experience to fintech players and other new entrants to the market who don't live under the regulatory scrutiny that financial institutions live with?

To be fair, I totally understand the resistance to making a banking system accessible in this manner. However, it's important to understand that this is already happening in our industry every day. Products like Mint, Yodlee, and Quicken may log in to members' accounts each day to harvest information—despite not having a relationship to the FI. They simply mimic a member logging in through the home banking platform and then harvest the information on behalf of the member. In this process, the financial institution is getting the short end of the stick in terms of the value exchange. The harvester gets their customers' valuable data. The harvester gets the transaction history of the customers, including what they bought and where. The harvester also collects the account balances and credit card rates and terms so they can cross-sell another credit card to the bank's customers. Meanwhile, the FI loses the ability to the market to this customer without paying to have banner advertisements inside Mint, Yodlee, and others. The FI also gives valuable information to competitors who use the credit balances and other data to make offers to the customer to move their accounts to their FI. So, if this is happening already, then why bother creating an API? Answer: Because if you don't do it, someone else will.

A Conversation with Florian Moser

I like to keep an eye on what goes on overseas because trends and technologies have a way of migrating. One day, while researching application programming interfaces, I discovered a German bank that I hadn't seen before. I was working with my team at BIG to connect Amazon's Alexa platform to a financial system and I wanted to see if there were any sample banking APIs out there that I could download. I had hoped to find a piece of software that would emulate a banking interface to save time on the development work I was doing. During my searches, I discovered Fidor, a European bank with headquarters in Munich, that had an online open API that connected to a test version of the platform. Literally anyone could connect to it. I was floored. I immediately signed up and started reviewing the API. In less than a few days, our team was able to connect the Amazon Alexa prototype to the Fidor banking system and test all of the features that we had in mind. Intrigued, I found a friend who knew someone at Fidor, and he introduced me to Florian Moser, head of products and marketing at the time. We chatted online and he invited me to Munich to see their shop. While there, I interviewed Florian for my podcast and I asked him about Fidor's strategy of opening its banking platform to the world. This is our conversation:

John		I've been fascinated by Fidor's rise, and what I want my listeners to understand is that [while] we think a lot about America from a credit union perspective—and I have a lot of folks who are European and listen to this from a credit union space, as well—is that there are other people doing really exciting things out there.
		I discovered Fidor when I was speaking to a big bank in Kansas City. One of the folks there brought up Fidor. Then I was speaking somewhere else and your name came up again. After that, I dug in, and I was just fascinated by what I found. So, before I get into my fascination, why don't you give us a little background on yourself and Fidor?
Florian		I am personally a customer at Fidor [and have been] for five years now. I joined Fidor as an employee in 2014, so almost two years ago. I am responsible for product development and all of our business relationships and partnerships. We have a very open approach. We definitely have our own products and we open up our account to various parties. We have a lot of partnerships, too.
		Fidor Bank is a fully regulated, 100 percent digital bank in Germany. We have currently about 300,000 people in the community and about 110,000 bank customers. We were founded as a financial community in 2008, meaning at this time the founders started a financial community, which is a place for people to talk about money in a transparent way due to the financial crisis and to speak about how a bank should look in the future. The community was able to speak transparently about the financial issues.
		Just imagine going into a banking branch and asking the person in front of you, “Are you new here? What products are you buying? How do you like the branch? How do you like the bank?”
John		That doesn't happen, yeah.
Florian		That is exactly what we want to do. So, building a bank around the customers, we ourselves understand that it is 100 percent customer centric. One hundred percent customer centric means living the way the customer lives. That means being 100 percent digital. So, everything that we need or want to do needs to be 100 percent straight through processes. What we offer customers is current account with a credit card, with savings or loans, anything you need. The nice thing is that we open our technology in order to integrate a lot of third parties, as well. We don't always have the best product out on our own but we include, for example, partners that enable fixed trading or global money transfer. We have partners that enable crowd finance, P2P lending. We have our own P2P lending function but we also partner with another company.
		It's a 100 percent digital bank account, and most of the functionalities are processable within 60 seconds. So, within 60 seconds you do the configuration, you select the product that you want to have, and it is instantly processed in house.
John		It's right there. You have it?
Florian		Yes, there is no paperwork and nothing to do afterward. 100 percent digital. That is what we think makes us unique because there is a lot of direct banks that have branches but still have a lot of paperwork. Usually the only paperwork that our customer sees is their credit card.
John		So, a couple points. Really good points. One, you mentioned before that you're the head of products and development and that you guys have this open system. So, myself as a developer, if I wanted to, I could connect to the Fidor system and not call you, you and I have never spoken before other than over the phone, and I showed up with my Echo already talking to Fidor. That is insane in America. I would usually have to call 62 people and give blood and some other things in order to get that kind of connectivity, but yet you're saying, hey, we want people to connect to us. When you do connect that becomes a product, and if I wanted to turn something like this into a product I would go through the techs group and just turn it on. It becomes sort of an app store connected to the Fidor engine. That's one of the fascinating things.
		The other fascinating thing to me was that you mentioned you had 300,000 community members and 110,000 bank members. Are all 110,000 also part of the community?
Florian		Yes.
John		So this is just a constant on-boarding process out of this community.
Florian		Definitely. Due to the fact that the community was first we definitely have more community users, but that is definitely one of our strategies to acquire customers. It is easier to acquire through the community. We have a goal to have a 100 percent digital customer journey from on boarding to how they get connected to the banks from first contact to the bank in the community, chatting with other customers, marking product suggestions, product rating. Then, if you see the value of the bank then you become bank customers.
John		Right. So in the community itself, is it a whole bunch of Fidor guys in there solving things, or is the community together…
Florian		It is self-regulated; we call it, so definitely it's another kind of customer service. The idea is really to have P2P. Of course, there's our P2P customer service. Our P2P is very active. We have four to five moderators that are more or less…
John		Yeah, to make sure bad things aren't going on.
Florian		But in the end, the customers really make peer-to-peer regulations. If somebody, for example, raises a question usually within five or six minutes he has the first answer. The average question gets seven answers. You can really see within the community that there is a static flow. So it's really alive. It's not a dead end.
John		Yeah, I described it as Reddit plus a bank.
Florian		Yeah, people are really connected with us. For example, decreased interest rates for the current account we discussed in advance with our customers. For example, our COO would go to the community or one of us in the community says, “Due to the market, we have to decrease the interest rates from 0.05 percent to 0.03 percent.” Then people make suggestions and ask, is this okay? What is your expectation?
		For example, at the end of last year, we were announcing a change from 0.05 percent to 0.01 percent and we really had over the year an intensive discussion with the community. In the end, we decreased it just to .025 percent.
John		So, the community affected how you run the business.
Florian		Partly, yes.
John		And they can speak to that. And, you know, I'm sure at this point people are figuring out why I'm here. It's a lot like credit union behavior. It feels like co-op.
Florian		Definitely, cooperation. Cooperation is the key to Fidor Bank. So, our founder is always saying you have to treat the customers like a co-manager. Not like a child and say this is how we should do it. You need to treat them on eye level. It's a very important part.
John		Yeah, that was just fascinating to me that you guys wanted to open up your API in that fashion. Also, that you have this community that is dedicated to financial literacy. That was another real theme that I saw as I moved through this. As a matter of fact, this was a quote from one of your folks. I'm assuming you know Stefan Weiß?
Florian		Our head of API?
John		Yeah, head of API at Fidor Tech, which is part of Fidor Bank here in the campus. And we're at this cool campus. There's this awesome board outside that is showing what looks to me to be all of the statistics of Fidor.
Florian		Our dashboard.
John		Just constantly, wherever you can see it.
		But, this quote from Steven is, “Another way is that we white label and license our technology that will be used by other banks to set up their own brand. This is how we will come through and rule the world someday.”
		So, even the idea that you guys are okay with sharing your tech outside of these four walls. I know that you have plans to move to the US and you already implemented on the UK.
Florian		Yeah, in the middle of last year we launched a debit card in the UK. Customer acquisition is good. Compared to the price we invested in the UK, it is famously low compared to other banks that recently started in the UK.
John		I have a researcher who I asked to research Fidor, and she came back at the end of her research and told me that she joined. She bought into it immediately. So, I think the value proposition is there.
		When I look at what you're doing compared to other digital banks that have tried this, you know, I think of ING. That's the one that comes to mind. I don't feel like they connected the concept of community in their space. I don't think they knew how to engage in a digital world. So, I think maybe that's kind of the secret sauce for you guys.
Florian		The one thing is that you can digitalize processes and you can leave the customer on its own. And the other thing is really to include the customer to make them a co-manager and to bring them into our processes. In product development, for example, we regularly include customers for beta tests.
John		Right in the community?
Florian		Yeah. For example, when we launch a new card product, we picked those customers from the community that were active in the card groups and have a high Karma (Fidor Community activity measure) where we see these customers are loyal, these customers know what they talk about. Together with the customers we found out things that even our processor didn't know.
John		Right. Because there's behaviors and things that can only be discovered en masse and just sort of crowd-funding it.
Florian		Yeah. And it's maximal effective. I don't think 150 customers sent them test cards, send them out into the world, let them test any consolation for the card. Then the feedback comes back immediately.
John		Wow! Yeah, that's just amazing to me, in the sense of when you guys are looking out there to decide on products, you have a built-in community. So many folks just put things out there blind and hope it's going to work, you know?
Florian		Yeah. It's very much a cultural issue, so one thing is to put a community in place but you really have to lift this community approach. So the community is really at the heart of any of our activities, or should be. And so anything that is not really related to the community, it doesn't make sense in the community, it needs to be crushed.
John		Well, it's a great point, because I think that if you weren't doing the community right, and I would say it's cultural but I would call it a digital culture, in the sense that they would see through that. They would know right away you're being disingenuous.
Florian		Yeah. Or if you just use the community for pushing products.
John		Yeah, if that's all it was, nobody would be interested.
Florian		No.
John		And I think the fact that you let them talk you out of your rate change, and maybe that's not a good word to use, you let them advise you on your rate change.
Florian		Yeah, we include them.
John		You included them.
Florian		And we explained to the customer why we would change the rate. We don't just change them. We explain them, okay, we have to change the interest rates because the market situation is different. On the other side, for example, we also decrease the interest rates on the overdraft so that the customers really see, okay, it's not all about maximizing revenues, but that they also get something back from this to grow.
John		Surely, yeah. And that might have been somebody said, “I would've been fine if you decrease the rate, but maybe if you give us a benefit here, that would be okay with us.”
Florian		Yeah. And that's what feedback is, so of course people are not happy, we decrease the interest rates, but a lot of people in this community talked and said, “Okay, I'm not a Fidor customer because of the price because I'm a Fidor customer because of the full package.”
John		The service, yeah.
Florian		Yeah. And that's the feedback that you never ever get from customers. No customer calls you on the hotline and says you're a good bank. But people are used to having this kind of conversation connecting bad feedback.
John		Online.
Florian		Yeah, online.
John		Yeah. And, you know, when I think about it, I feel like in America more and more people are moving that way because, unfortunately, in America, and I don't know about Germany, but we've not focused on financial literacy. And as a result, people are looking for help, you know. I came in here and I speak a little German, enough to read that in the center of your board there was a big circle that before you erased it said, “Gemeinsam mehr Geld,” which was “Together more money.” And at first I thought, was that more money for Fidor? But then I looked at the design role and it looked like the giant equation to figure out how to get more money for the member or for the consumer.
Florian		So this is also a good example for combining technology with cultural thing. So in the future we will more and more share the data that we collect on behalf of the customer or through the customer, share this data with the customer to give him more money at the end of month, so to make him really aware of what is happening, how other people behave, so we could use this data on our own and make analysis and enhance our product, what we do. But on the other side, we also share, for example, usually the typical customer has this and this amount of gold, for example the Fidor customer has 20 gram gold in his portfolio, how much do you have, why do people anyhow buy gold. So for example, Fidor customers get €2 bonus per month if they don't use their credit card at the ATM. So we say, okay, you get this money. We don't have that much fees. On average, people go this and this, off to the ATM how much, how often do you go, so the goal is really to have more money at the end of the month.
John		So it's interesting, you're using analytics to really discover who's being successful with their finances. One example would be you and I were both buying the same product from the same store but some how you were paying less for the exact same thing. What does Florian know that I don't? Oh, it turns out there's a promo code. Or there's something that you could share that across community to everybody, or if you bought it this way through this company. You know, it's that co-op mentality.
Florian		And that's, for example, we don't just cooperate with our customers but also wanted to enable cooperation between customers. We have about 8,000 SB customers, a small corporate. And whenever these corporates have a unique offer for other Fidor customers, we are happy to share this offer with our original customers, to have a community between retail clients and SB clients, for example.
John		Yeah. You know, one of the reasons I'm here is that just so much fits in with the philosophy of BIG and what we're trying to do with our organization, some very cool stuff. And for those of you who are listening, I encourage you to Google Fidor and, you know, Florian's been very open, letting me just kind of ask a lot of questions, and one of the main questions that I know folks are going to want to know is, the US. And it is that you're looking at coming, I believe, across the ocean to visit us. And I know you can't talk about everything, but tell us what you can about…
Florian		We have a partner bank in the US we are working together with, where we put our technology in place. And hopefully very soon, we can announce something either with the Fidor brand, another brand, another business model. So we will be in the US.
John		Something similar to Simple? Are you aware of Simple?
Florian		Yeah, maybe not the Simple way.
John		Yeah, but something where on top of this particular partner…
Florian		Yeah, but the Fidor will be more in backend for the technology part of…
John		Got you. Yeah, it'll be more transparent.
Florian		Yeah.
John		Okay, so we'll close it with this. You've been very generous with your time, and I'm so thankful for that. What excites you? You know, I feel like this place has like been really exciting just to come and talk to people who seem to understand, you know, where everything is, fintech-wise, and can speak that language. What excites you that's out in the financial world right now? What are you guys gearing up for? What's exciting to you?
Florian		On the one side it's all about mobile, so I know everybody's talking mobile, but what we really want to achieve and what I'm excited also from a process side of view, to make really a full mobile bank account, not only—what is it?—channel, but mobile-only with all the stuff that comes with it and not just have a transaction list and have a credit card but everything.
John		Yeah, because everybody's got that.
Florian		Credits, insurance, all the stuff.
John		A bank in your pocket.
Florian		Bank in your pocket. On-boarding. Everything. 100 percent digital, and based on our technology, maybe with partners, and maybe it's other partners that come into play, but that's really the challenge also of our first, to make really everything 100 percent digital mobile, combined with everything that you can use with the mobile. Be it payment. Be it loyalty. Be it artificial intelligence. So we're ready to make the mobile account not only mobile but intelligent.
John		Document imaging.
Florian		Everything, yeah.
John		GPS. Beaconing. All the things.
Florian		Bringing everything together, and sooner or later also combining it with the community.
John		And will the community guide some of that? Will they guide what that looks like and how that product kind of comes together?
Florian		No. Partly yes. But on the other side, the typical user is not that much into this technology developments.
John		So, speaking of typical users and technology developments, one of the things I found interesting, and we'll close with this, is you're one of the very few banks doing the blockchain and Bitcoin with your partnership with Ripple.
Florian		So we don't do blockchain, so we enabled our customers.
John		You enabled blockchain, correct.
Florian		We enabled blockchain-related clients to realize that this is more like Bitcoin.de, which is one of Europe's biggest Bitcoin P2P platforms, or Kraken, or also Ripple, which is enabled in the current account…We're always happy to be the banking partner. On the other side, we are always keen to make things happen. And on the other side, from a tech department, we think about and we're looking in the direction of using blockchain for a call banking system.
John		And we think that faster payments in America, that's going to be probably something that we see as a matter of fact I think in the podcast that we just did. We talked a lot about that. We talked about the impact of faster payments and how the blockchain will probably be, from a distributed ledger standpoint, the de facto standard at some point, and it seems like you guys are engaging that as well. So I have a question for you. If I applied for a loan with Fidor and I stated my income as Bitcoin, would they freak out or would they just be okay? How would the underwriter react?
Florian		There's no product yet, but maybe that could be part of storing with them. We are open to everything. Open up to everything.
John		You're open to everything. You know, that's something we talk about a lot in America. You know, we already have people showing up and saying, I get paid in bitcoin….
Florian		Yeah, I have no money, but I have a lot of bitcoins.
John		Well, and what's funny about that is everyone assumes if they have bitcoins, alt-coins, light coins, all of these things, then immediately they're some sort of criminal. In America anyways, that's what we think. I don't know why. I guess it's the movies, you know. But that's the sense that we get. And so the idea that, at least, if nothing else, they can be on deposit with you and have value through the Fidor interface I think is a step in the right direction.
Florian		Well, you could think about a simple bank loan on Bitcoin basis.
John		Well, absolutely, why not? When you say asset, I assume you mean secure line, secure loan gold. You know, that's interesting, when you said everybody has this amount of gold, you know?
Florian		Yeah, and people can buy gold, precious metal, and they can gold, platinum, palladium, silver in the account.
John		See, I'm a comic book guy, I want to buy the stuff (adamantium) that Wolverine has running through him, I don't know if that sell that here. I'll look around later. Like I said, I really thank you for your time and I'm sure hopefully we'll hear from you again in the future.

As you can see, they are very open about their strategy to be an open API to anyone. I also found it interesting that they believe community plays an important role in the institution. These two things go hand in hand. Being open means that there will be a community, like it or not. People will coalesce around the opportunity that you are providing them and create something from nothing. We see this behavior in open source platforms where like-minded people collaborate to improve a software or service and donate their time for free.

The first step to solving this problem is to implement your own API to your bank or credit union. This should allow third parties to do everything that you do inside of your own products. Don't worry about who is going to get access to this right now; that's not as important as creating a complete interface. This interface is going to be foundation for everything you will do for the foreseeable future. Let's call this interface the FI platform. You may think that you have something like this in place already, and it is possible that you do, but before you just flip past this part, answer these questions to determine if you really have full featured and ready for prime-time industry grade API that can be used by others to create valuable services for your customer. If you are a CEO or a FI executive log into the companion website and download the following API readiness report and share it with your IT area:

Does the API have access to all of your systems? If it is, then the API should be able to execute a command like GETALLACCOUNTS for a single customer and data will be retrieved from each individual system such as a Mortgage servicing platform and a Credit Card platform without having to make separate calls to each of these systems.
Is your API fully documented? Would you feel comfortable giving this document to a business partner?
Does your API support all the features that your digital platforms currently support? Can it create a new Billpay payee or add a ACH payment? Can you reset a password with it?
Is your API securely accessible via VPN or via the Web using state-of-the-art security such as oAuth2 or SAML?
Does your API provide account level security that can limit access to any service?
Is there business logic that your API should have but doesn't? A good example would be ACH processing days. If a vendor uses the API to setup a ACH payment and tries to schedule it for a fed holiday, will it go through without notifying the vendor that the payment cannot be processed on a fed holiday?
Does your API support universal logging and reporting?

If you answered no to any of the questions above, then you have some work to do. A true API will have all of these features and more. You might be thinking that this is going to be a really long road. Don't fret: There are answers out there.

Getting Started

For the Technology Organization

There are software packages such as MuleSoft and Software A&G that you can purchase and create the API with your development staff. These are considered enterprise grade products and will solve most of the problems above. These products ride the line of being a pure product and being a toolkit that your IT staff can use to create the platform that you desire. You can also reach out to your industry peers to see if anyone has developed or is developing something similar for your platform. Sometimes other FIs will gladly accept the help of FI that isn't a direct competitor to share cost of creating such a platform in the form of a purchase of the application.

For the Services Organization

There are full-featured packages that can be deployed and allow you to expose your various systems via API. Many times, these sorts of API platform packages will be provided by your core data-processing solutions providers; otherwise, there are also third-party platforms that do the same thing, such as Finnovations Concerto platform. I would suggest reaching out to your core solution provider first then if they don't have something check with your industry peers to find out if anyone is using a third-party platform that they really like and that supports your core data-processing provider.

The Second Step

Now that the FI platform is up and running, it's time to cut off the free access that the third parties have been getting to your data on behalf of the customers. This is a relatively simple thing to do technically but far trickier in terms of marketing and customer service. For the technical side, have IT review your logs and find out the IP addresses of the systems that are scraping your data. It's usually simple to see these patterns in the logs, as these bots tend to move at a speed that no human could ever duplicate and tend to come in mass at odd times in the early morning (which is very nice of them, btw—they could run it at your peak time and add extra stress to your system). These IP addresses will also likely be associated with multiple customer accounts. Have your IT folks track down all of customers' accounts associated with these IPs as your team will need them to inform customers that the products they are using will stop working soon. You will also need to perform a WHOIS on these IPs to determine which vendors your marketing department needs to call to start the conversation of having them access your API instead of going through your home banking or mobile platform to obtain your customers' data. One of the main reasons that they should be open to having a relationship with you is that the process they are using now is very clunky and highly susceptible to failure due to its dependency on the placement of data on the screen in the home banking site (which can often be moved around by the customer, as already mentioned). This methodology will also break if it encounters a Multi Factor question or out of band password request. The customers often must regularly intervene to keep these services working properly.

The Third Step

This is where it gets interesting. Now it's time to turn the tables on the harvesters or scrapers. Here is where you need to stand firm. Have your staff contact each of the entities that are screen scraping your customers' data and let them know that you will be blocking them from your system on this date and time in the future. However, you can also inform them that you have a new way for them to access the data and for a price of <insert amount here> per customer they can pull the data in a far more efficient and secure way. At the same time, your marketing team will need to contact every one of your customers using these services and let them know that you will be discontinuing access to your platform in their current form due to the inefficient way that these entities access the data. As an added benefit, you can let them know you have a better way for these entities to access the data, and if they truly want to continue using this service, it would be helpful for them to reach out to the entity and inform it of the new process. You can even include a nice cut-and-paste prewritten email for the customers to send to these entities in your correspondence with them.

This may seem like a bold and kind of scary move, and I am sure that when you review the logs, depending on the size of your institution and the demographics of your customers, you will find a large number of customers that use these services. At first, these customers may be dismayed that their financial institution is forcing their provider of choice to use an API, and they may be even more dismayed to find out that you are charging this provider for the access when it has been free up until now. However, it's time to be bold and stand up for your customers and their data. Financial institutions must stop giving things away for free and plan to measure and monetize their data if they are to survive the coming digital transformation. The tragedy is that many of these customers are among your most affluent and profitable, but since they no longer visit your digital sites, choosing instead to visit the site that is harvesting their data from home banking, they also no longer see your advertisements and don't read your secure messaging, in some cases the harvesting entities will turn off alerts in favor of sending them their alerts. Moreover, each time a harvester or scraper accesses data, it cost the financial institution money by putting stress on the infrastructure and creating overhead in bandwidth and increasing storage costs by bloating the logs. In the end, all it really does is put your organization at a huge disadvantage in terms of having the opportunity to increase engagement with customers.

OK, now that you have this magical API or FI platform, it's time to leverage it even more for your customers. It's time to leverage other services and allow consumers to access your data efficiently and securely. Consider for instance the rise of Amazon's Alexa platform. Once considered a toy, it is rapidly becoming a channel of choice for many consumers to get their data, since it is far easier and more natural to interact with voice than it is to type and click on a visual interface. Once you have this FI platform to connect to, you can either find a partner to connect you to the Amazon Alexa platform or build it yourself.

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