Anabel PerezOnce the exclusive concern of technology teams, application programming interfaces (APIs) have quietly become key business drivers and critical links in new and increasingly relevant value chains.
Nowhere in Latin America are these links likely to be more consequential than in financial services and payments — sectors long closed and guarded by a select few, but increasingly under pressure to open, connect, and embrace interoperability with a diverse and widening group of systems.
The region’s emerging and much discussed fintechs — companies applying technology to improve financial activities — are at the forefront of these challenges (even launching their own portals for software developers to experiment).
The combined trend towards APIs and fintechs presents an important opportunity for nearshore software development companies, BPOs, and their clients in the region.
If, as evidence suggests, new disruptive customer experiences and platform-driven businesses have already begun to change the flows of money and data in Latin America and abroad, then it stands to reason that it’s time to look closer at the business of opening, interconnecting, and joining disparate systems.
The Gig Example
Gig economy companies (or more specifically, their platforms) provide an excellent window into the future of interconnected systems.
Largely built on and supported by the technologies and assets of others, digital natives like Uber and AirBnB must naturally look for solutions to various deficiencies in legacy core infrastructures as they expand to emerging markets like Latin America. The reason is simple: in order to deliver the kinds of customer experiences that make them global juggernauts, they need to close the gaps left by our geographies’ siloed systems.
As copycats and corporate innovators in the region and others around the globe seek to emulate their frictionless experiences, so too will they have gaps to close and systems to connect for their own means.
Information Asymmetry
It’s better to have a legacy system than a legacy business. Legacy infrastructures, however, often present a kind of “information asymmetry” that threaten current innovation and growth — in large part due to a lack of interoperability.
In Latin America, decades old core banking and payments infrastructures are often unable to link together seamlessly with new parties and are transforming too slowly to meet the growing demand for new types of mobile and digital transactions.
That kind of disparity—between what digital natives need and what financial services firms can offer—is becoming a big problem, one example being bankers that want to gain and retain relationships with corporate innovators and other major companies to increase their digital offerings across industries.
Evidence is also growing that companies are quick to change banks if they can’t get the services they want. In countries without real-time payment infrastructures, for example, 80% have considered moving main banking relations in the past year, according to a 2017 Ovum Transaction Banking Survey.
Decisions such as these change the flow of money and data away from some systems and toward others — and perhaps serve as a cautionary tale.
The Beauty of APIs
APIs are, of course, effective bridges for asymmetry issues. APIs govern how applications communicate, linking ecosystems of technologies and organizations in ways that allow businesses to scale, monetize data, forge profitable partnerships, and open new pathways for innovation and growth.
Perhaps slower to grasp this reality than other industries, banks have more recently begun to increase their partnering with fintechs and IT services companies to develop public and private APIs that integrate once-closed banking systems to actual ecosystems.
An open API approach allows a cross section of institutions and their customers, including BPOs, to innovate and improve customer experience incrementally, without investing heavily in more hardware or developers.
The ability to allow one piece of software to interact with another piece of software using publicly available tools is a beautiful thing in its ability to enable and accelerate the digital transformation of complementary services.
The Talent Pool
Latin America has earned a reputation as a place where companies can work with a growing pool of highly skilled programmers, software architects, and project managers.
The stronger nearshore providers are well versed in digital customer experience (CX) and competencies with the newest API standard technologies such as JSON and REST. In addition, they are well-suited to carry projects that are extremely intuitive to other software developers, providing an easy way to distribute, collect, and modify data that is compatible with most current programming languages like PHP, Java, Python, and NodeJS.
The Importance of API and Developer Portals
As business leaders and other decision makers come to appreciate the ability to innovate faster and at a lower cost through APIs, they naturally want to know how to get it and how to scale it.
Investing in API portals and developer hubs lower the barriers for new and existing partners to test concepts and deploy their ideas, accelerating not only innovation, but time to revenue for the parties involved.
Also, if joining and creating ecosystems seems like a far off and abstract idea, then the reality of being able to secure “quick wins” and faster proofs of concept through these tools provides a nice counter balance.
As companies seek solutions to lagging interoperability in Latin America and other regions, they should be seeking out fintech providers and outsourcing firms that can bridge a variety of gaps, providing a catalyst for new ecosystems and opportunities in both the short and long term.
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