A new joint SWIFT and Boston Consulting Group (BCG) report reveals that interest in application program interfaces (APIs) is rapidly increasing in the securities servicing industry and firms may leverage the technology to handle diversity of asset types.
In 2018 alone, awareness of APIs among asset managers jumped to 72%, up 26 points since the year before according to a BCG survey and this is encouraging more pilot schemes to be established between asset managers and their custodians.
Post-trade API adoption has been slow and inconsistent due to a lack of regulatory catalyst and the varying levels of technical sophistication and openness that asset managers operate on. Further to this, 56% of the survey respondents found the maturity of securities APIs to be “experimental” while 21% say it is “high” or “medium”.
The report highlights how APIs can provide efficiency and cost savings through automated data exchange, real-time visibility of information such as settlement status and intraday risk, services such as enriched data and analytics and shareable operational benchmarks.
SWIFT and BCG advise ensuring that the foundational pieces of API solutions are agreed at an industry level between firms so that interoperability, and in turn, efficiency can be supported through networked APIs, rather than point-to-point solutions. At the same time, security and resiliency standards must be met.
Juliette Kennel, head of securities and FX for SWIFT, says: “APIs have the potential to be a powerful enabler of innovation in the post trade industry, just as they have been in payments and other areas of banking.
“Interest in the technology is rising and the green shoots of experimentation are promising. But to really stimulate and accelerate broader API adoption, we need to eliminate uncertainty on standards and improve understanding about the technology’s maturity.”
Sumitra Karthikeyan, global head of securities servicing for BCG adds: “Wholesale banking is becoming more digital, and APIs have been one of the key technologies underpinning that transformation.
“APIs are now starting to break into the securities servicing industry, emerging as a leading technology executives turn to as they seek to transition to digital-first firms. While familiar challenges from the past such as interoperability and security are headwinds to adoption, we believe they will be overcome and expect increasing adoption going forward.”