APIs (Application Programming Interfaces) are serving as essential tools for open innovation, particularly relevant ones for the future of banking with the rise of trends like embedded finance. BBVA Spark is leveraging this technology within its business model to deliver enhanced value to its customers, as seen in the recently announced partnership with Vecttor (Cabify).
By Horacio Ballestrin, Head of Product, Channels & Innovation at BBVA Spark; and Gonzalo de Diego, Senior Manager of Strategy & Business Development at BBVA Spark.
APIs (Application Programming Interfaces) have been described as the âglueâ of the internet for their ability to connect software platforms and seamlessly integrate functionalities from one system to another.
In the financial sector, they drive some of the major trends in banking, such as open financeâthe natural evolution of open bankingâand the ubiquity of financial services towards which the embedded finance paradigm is moving.
The adoption of APIs in banking has grown steadily, spurred by the industryâs digital transformation and the prioritisation of user-centric services. A KPMG analysis highlights that APIs drive transparency and optimisation, and by 2023 they accounted for more than 10% of banks’ R&D budgets. Another McKinsey survey revealed that 81% of IT executives at leading banks regard APIs as a top priority for both business and IT operations.
APIs as a business model
APIs have emerged as a significant business opportunity for companies, leveraged through two primary models. The traditional B2B model involves charging other businesses for API usage, while the B2B2X (âbusiness to business to consumerâ) model allows partner companies to offer APIs to their end users, earning financial compensation by driving traffic to the API developer. In this way, APIs can become an indirect revenue stream and foster synergies that benefit all companies involved.
BBVA has been a pioneer in the banking sector in its commitment to APIs: in 2016 the bank launched BBVA API Market, a marketplace that has been offering its customers a series of proprietary APIs for years. Now, through BBVA Spark, this product also contributes value to high-growth technology companies, which have access to treasury management solutions tailored to their scaling needs and innovative business models.
BBVA Spark embeds API solutions throughout its customersâ journeys, positioning itself as a leader in open banking. This approach automates and simplifies operations, maximising business impact while delivering tangible benefits to both companies and their end users.
The power of APIs in banking
APIs allow fluid communication between systems, enabling the exchange of data, services and functionalities. This is particularly relevant in banking, where they have revolutionised the way financial institutions operate, boosting efficiency and customer satisfaction. Specifically, there are four major applications of APIs for banking that leverage innovation:
- Payments. APIs facilitate integration with payment platforms, enabling secure online, app-based, or in-store transactions. For example, Mexican fintech Kueski offers customers of its BNPL solution Kueski Pay to make payments directly from the app or any BBVA branch thanks to API integration.
- Collections. The collection APIs enable referenced collection, i.e., they generate unique identifiers for each payment received by the company that makes it possible to trace its origin, facilitating reconciliation and financial management. Mexican lending fintech KonfĂo, specialised in granting microcredits, relies on BBVA’s collection API to reconcile all payments made by its customers, and uses it to reliably track the repayment status of each loan.
- Notification. These APIs enable notifications to confirm the completion of each stage of a transaction (e.g., sending or receiving a payment). They can operate independently or as part of a collections API, such as BBVAâs offering in Mexico. For instance, upon receiving a final collection, companies can receive notifications with detailed transaction information.
- Reconciliation. Reconciliation APIs automate bank reconciliation, making it possible to compare the company’s accounting information with its bank transactions. A notable example is the collaboration agreement recently signed between BBVA Spark Spain and Vecttor (a ride-hailing company that is part of the Spanish Cabify group), where drivers deposit cash payments into Vecttor accounts via BBVA’s Pagos ExprĂ©s service. This collaboration also includes the integration of the reconciliation API developed by the bank to connect Vecttor’s accounting system with Pagos ExprĂ©s and thus match recorded income with journeys made, automatically and in real time.
APIs in the financial sector extend far beyond payments. They can verify bank account ownership, enable financing at the point of sale and optimise countless processes, driving automation and fostering innovative business models.
Looking ahead
As the banking industry continues to evolve, the demand for APIs is expected to grow substantially. Â Fortune Business Insights projects that the value of the global API market could surge from $5.42 billion in 2024 to $34.17 billion by 2032, with a CAGR of 25.9% over this period.
The progressive development and deployment of APIs will also lead to new use cases and customer demands. BBVA Spark is actively working on building innovative API solutions for the long term to support entrepreneurs, ensuring their offerings adapt to present and future needs.
