By Ray Birch
ORLANDO—It’s time credit unions of all sizes begin thinking hard about APIs, and getting someone on their team who understands them.
Tom Davis, SVP of finance and technology at CSCU, said a lack of understanding of application program interfaces (API) today will likely leave the credit union out of many new payments and financial services opportunities that are coming.
“An API allows two systems not meant to talk to each other to do so,” explained Davis during CSCU’s 2017 Annual Conference. “The API is the interface between the two.”
Davis said it is critical, particularly with the Internet of Things applications growing fast, that credit unions build their systems with the thinking that their systems will in the near future have to talk to other systems and devices that are not even on the credit union’s radar.
“Why is it important to have an API strategy today? Because you have no clue what the Internet of Things will bring to you and you will need to be able to open up your finical services model in order to be able to do something new,” said Davis.
'Limitless Possibilities'
For example, can a member with the credit union’s mobile app interface with Google Maps, asked Davis.
Tom Davis
“If so, then your API can interface with Google Maps. Then your app can know if your member is on a car lot, maybe ready to trade in their car and the car loan they have with you. You can then send the member a notification saying, ‘I notice you are on a car lot. We have great financing rates, here they are.’”
That example is one of almost limitless possibilities for connecting with other systems to sell or provide financial services, said Davis.
“At the end of the day we are merchants, and just like all other merchants we need to adopt new strategies,” he said.
Davis noted that credit unions are also facing the “disappearance of payments, as the plastic card and even the mobile phone get pushed into the background with the advance of card on file payments.
“But APIs will make us more visible now,” said Davis, stressing the importance of moving away for systems coded so proprietarily they cannot interface with other systems.
“Each time a new use case comes up do you want to open up that old code set and interface to it,” said Davis. “A lot of code credit unions have is actually code they buy form someone else—a third party writes it for them. It’s important now that you have your third parties code APIs.”
Another API use case is coming for instant issuance, insisted Davis.
“When members’ cards are compromised or they take a new card from you, they will want the token put on their phone immediately so they can go right out and use their card,” said Davis. “If you signed a VDEP or MDES Express agreement and you want to be able to do instant issuance in the token world, you will have to code to an API in order to do that. You will likely go to your mobile banking provider to get that done.”
Understanding APIs
What credit unions need to be thinking about now is making sure someone on their team understands APIs and how important it is becoming for different systems to be able to talk to each other.
”I am not saying this person needs to be able to code. They just need to have an understanding of APIs and the vision to see how credit unions will need to connect to systems they never needed to connect to before, and devise and API strategy,” said Davis.
Third parties the CU works with will also need this vision.
“Their partners who are in charge of their code will have to have an understanding of the credit union’s API/digital strategy and get aligned to that so they can code to it,” said Davis.