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Leveraging APIs for Cost Savings and Value-Added Services

Data Science and Technology

By George Wang  |  September 10, 2020

News flash: APIs are as ubiquitous as Starbucks and will be here to stay. Remember when television sets (and before that horseless carriages) were considered fads that would go away like the dinosaur? Neither do I, as the number of TVs (and cars) created has easily exceeded one billion. What might be surprising is the number of banks that still haven't taken the digital leap. Last year, McKinsey estimated that most banks are still at the development phase in terms of understanding how a data-driven business fueled by APIs will work.

On the flip side, some banks have started to partner with financial technology (fintech) firms to offer a more personalized experience for their users in an attempt to attract and retain revenue streams. This could be as simple as offering personalized and relevant news based on a customer’s portfolio holdings to more robust alerting functionality notifying users when there’s a market-moving event that impacts their investments. Some firms have even taken the additional step of combining artificial intelligence and machine learning to help their clients minimize risks while achieving alpha.

At initial glance, these might seem like monumental undertakings that require a great deal of investments and resources but in reality, most of them can be achieved by leveraging various APIs offered by service providers that can be used as building blocks to construct whatever functionality the firms can imagine.

Boston Consulting Group (together with SWIFT) published a white paper last July detailing how they think APIs can deliver value. Although the topic of their study had a focus on investment security services, one can easily imagine similar values applied across the financial industry. The four key dimensions proposed are: cost savings through efficiency, visibility in real time, value-added services, and aggregation of data and benchmarking of services. In this article, I would like to focus on two of these four items—cost savings and value-added services—as I believe these are the most tangible and perhaps important dimensions for most firms.

Cost Savings

Firms can leverage the data management capabilities of the partner they are requesting the API from, which saves them (1) money for the added infrastructure and (2) engineering resources to maintain the data. 

One of the primary reasons APIs have become so popular is that it allows people (and firms) to access data that is neither on premise in their data centers nor in their cloud storage. They no longer have to pull down multiple files from an FTP server, create and maintain a job that parses out the content into a database, and write services to retrieve the data. Instead, firms can leverage the data management capabilities of the partner they are requesting the API from, which saves them (1) money for the added infrastructure and (2) engineering resources to maintain the data. These cost savings allow firms to focus their spend and resources on what they do best and improve their products and services to attract and retain customers. This is perhaps the key driver for any companies undergoing their digital transformation, as passive investments (and even some actively managed ETFs) with ultra-low fees continue to take over the market, previously detailed by our own Elisabeth Kashner. The trend has made cost savings even more important than ever as firms need to redirect some of that money into factors that differentiate themselves from their competitors.

Value-Added Services

APIs enable firms to access content and functionality that otherwise would have been too time-consuming and expensive to try and acquire on your own, and should be a staple for any firms that operate in today's world.

One way firms can provide that differentiation is through value-added services. In addition to providing data and content at your fingertips, APIs can also provide value-added services that you otherwise would have not been able to offer or have had to build yourself. Let’s say you are out visiting clients and wanted to show them some options for how to optimize their portfolios. Instead of bringing printouts of specific scenarios (which may or may not meet the needs of the said client), it would be much more efficient and powerful to run through those scenarios (and any others you hadn’t previously thought of) on the fly, using a tablet app that’s powered by a set of APIs. Not only can clients see where they stand today, but the advisor can pivot the conversation in the most appropriate direction and paint a picture of where clients can be tomorrow based on what goals they want to accomplish.

Or perhaps you want to notify users about market-changing events (i.e., a revolution in a foreign country, the Fed raising interest rates, CEOs tweeting that they will take their companies private, etc.). Wouldn't it be great if you could just call APIs to pass all the necessary information to an existing engine to keep track of the events when they occur, allowing you to be in control of the actual notification process? Since many firms have their own “secret sauce” of what makes them unique from one another, the sky’s the limit as to what values can be added to their customers.  

Perhaps the best way to think of APIs is that they are enablers. APIs enable firms to access content and functionality that otherwise would have been too time-consuming and expensive to try and acquire on your own, and should be a staple for any firms that operate in today's world. As we continue to kick off the new decade, it’s safe to say where there’s a need, there’s almost always an API.

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George Wang

Senior Vice President, Product Development, APIs

Mr. George Wang is Senior Vice President, Senior Director of API Strategy at FactSet. In this role, he is currently responsible for the overall growth and promotion of various FactSet APIs available to clients. Prior to this role, he was in charge of professional services for FactSet Digital Solutions North America and responsible for both pre-sales consulting and post-sales implementation. He joined FactSet through an acquisition from InterContinental Exchange (as part of Interactive Data) where he held a similar role. Mr. Wang earned a B.S. in Environmental Biology and Management from the University of California, Davis.

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