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Open APIs and Digital Transformation

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Open APIs and Digital Transformation

Learn about Open API standards and how they are changing the way various industries do business by making them more interconnected.

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Digital transformation is as real as it can get. Based on a recent survey done by Gartner, 42% of CEOs have already started working on it. This 42% does not include the tech giants like Google, Facebook, Amazon, or Microsoft since they are already beyond digital transformation (more towards the AI part of it). Even though there are still 50% of CEOs who have not started on this journey, they definitely will (hopefully, if they want to keep up with the competition). While enterprises are moving towards digital transformation, the technology itself has gone way beyond the standard terms.

People who engaged with the technical aspects of digital transformation have identified that it is not only about individual enterprises’ digital transformations, but the entire industry’s cooperation to reap more rewards for enterprises as well as customers. That is where the concept of “Open APIs” or “open standards” came into the grandstand. One of the hot topics in the European region is the Payment Services Directive 2 (PSD2) compliance regulation, which required all the banks operating in the EU to be compatible with PSD2 by January 2018. Even though this came as a regulation, this is a revelation in the way people deal with their banks.
One API, GSMA, is another set of “Open APIs” which allows multiple mobile network operator (MNOs) to interconnect with each other and reap the benefits of a much larger customer base than doing business with their own customer bases.

In a technical sense, both these “Open API” standards provides a mechanism to interconnect enterprises which are offering a similar type of services to their customers (PSD2 for inancial services and Open API for mobile network services) and make them share the customer bases they have so that they can benefit from a somewhat larger, aggregated customer base. From the customers' perspective, they will also be able to use multiple accounts/profiles when they purchase services from 3rd parties. At an abstract level, the architecture for Open APIs would be as depicted in the below picture:

Figure 1: Open API architecture.

As depicted in Figure 1, with the concept of Open APIs, different vendors can expose information about their customers with the customers' consent in a unified manner. Their internal implementations for providing these APIs can be different, but the APIs are unified. Using Open APIs, third party service providers (e.g. online shopping, merchants, location-based services, etc) can engage with the customers when customers are purchasing their products or services.

Let’s take an example where you want to buy a laptop from Amazon.com and you need to make the payment using your existing bank account rather than a credit card. When you check out your item from Amazon.com, the website will provide you with the option to select from which bank account you are going to make the payment. This is achieved through the Open API which has been used by all your banks to expose your account information. You select Bank A, and you will be redirected to Bank A's web site. Now you confirm with Bank A that you allow Amazon.com to debit the relevant amount for the product which you are purchasing. That’s all. No credit card. No third-party credit card providers.

This example showcases the power of Open APIs in a banking use case, but this is true for all sorts of different industries. GSMA is being used in different places across the globe for various use cases like mobile connect, mobile ID, etc. It has allowed people who didn’t have any facilities to connect with entities like banks using their mobile phone. This has transformed their lives like never before.

As a final thought, with the concept of Open APIs and digital transformation, the world is becoming a more connected place than ever before. It allows people from different capacities (wealthy as well as poor) to reap the benefits of the digital age.

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Topics:
openapi ,api ,digital transformation ,integration

Published at DZone with permission of Chanaka Fernando, DZone MVB. See the original article here.

Opinions expressed by DZone contributors are their own.

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