UK Digital Banking Trends & API Strategy Recommendations

In this post we’re taking a look at some key UK digital banking trends such as open banking, and their drivers, and establish some recommendations for large banks’ API strategies to become digital leaders.

For a deep dive on API first for large banks, you can also download our banking whitepaper here.

Overview of UK Digital Banking & API Strategy for Becoming a Digital Leader

Digital banking ecosystems are beginning to flourish in the UK. Early legislation and adoption of open banking, and the subsequent rise of fintech disruptors, means the UK has had a head start in a number of areas at digital, at least when it comes to the Western world.

And the need for digital banking offerings is greater than ever — in response to the COVID-19 pandemic,we saw a rapid shift in the way consumers interact with products and services, but as EY discuss in this recent article, it’s yet to be seen if these changes will be forever as we move into the “new normal”. Therefore, a key part of digital banking is adaptability — the flexibility to respond to changing business models and consumer demands.

While the future is still uncertain when it comes to digital, it’s going to be driven by an API-first approach.

There are 3 measurements to judge emerging payoffs in this API strategy. The first, is a great mobile banking app — for example Barclays, who were named best mobile app in a recent Forrester Banking Wave Report (alongside challenger bank Monzo), as well as offering the best payments and money management capabilities.

The second, is a great API Portal and Developer experience, as demonstrated by banks who appear in the top right quadrant of Innopay’s Open Banking Monitor.

The third measurement is something not many banks are advertising yet, but provides a massive competitive advantage — a holistic catalog of internal and external bundle-ready digital building block API and Services. Amazon is the benchmark for this and demonstrates a proven approach.

Amazon as a benchmark for a portfolio of internal and external bundle-ready building block APIs and Services — and their subsequent entry into banking

Jeff Bezos’ famous API mandate at Amazon around 2002 stated that all APIs and Services should be designed to be externalized (and therefore as a business decision vs. a technical limitation). This set in motion the migration from a monolithic and hard-to-change ordering system, to what is now 100s of APIs and services driving Amazon AWS, marketplace etc..

This enabled Amazon to move swiftly into launching their own unbundled banking functions as competitors to traditional banks globally, with offerings such as Amazon Pay amongst many others.

This trend for a portfolio of internal and external bundle-ready building blocks is now beginning to grow across verticals, including some public banks advertising their API and Banking-as-a-Service coverage in financial briefings, as a way of showing they’ve unlocked functionality and are in a position to be innovative and responsive.

UK Banks have laid good foundations in their API Strategies, but moving to API Strategy 2.0 is key

UK banks have laid excellent foundations, and many are now meeting the first two benchmarks in digital strategy success, by implementing what we at digitalML call API strategy 1.0:

  • Building API gateways (amongst other existing distributed environments
  • Having a number of live APIs
  • Building an API and micro/macroservice architecture
  • Growing good competencies in the API and Service development and architecture — both Greenfield APIs and Services and now starting to tackle legacy and Brownfield

Banks that are digitally determined, and moving towards benchmark three are now looking beyond this to API strategy 2.0. API strategy 2.0 involves scaling from 10–100 Public APIs to 1000s of bundle-ready building blocks (reusable business and IT capabilities represented as APIs and Services) with consistency and standardization.

Moreover, large banks are building out this API and Service portfolio in a way that can best leverage hard-to-find talent and expand the audience of APIs and Services — both throughout digital teams and to expose existing functionality (currently locked in legacy).

A modern digital bank has business and IT functions represented as reusable APIs (digital building blocks) in a way they can rapidly reconfigure and combine to plug and play into whichever area of the digital landscape they would want — be that launching new digital consumer offerings on their own, entering into new revenue streams such as BaaS, or embarking on new partnerships to incorporate existing services into their products.

There are some key drivers in the UK space that make this need to take API strategy to the next level even more urgent (in addition to worldwide drivers like customer expectations and technology):

  • Legislation and Economics
  • Open Banking and Digital Opportunities — to capitalize on open banking as more than a regulatory box-ticking exercise
  • Future uncertainty — Brexit

Open Banking and Digital Opportunities for Large UK Banks

Just over 2 years into the Competition and Markets Authority (CMA) directive, which has made the UK a leader in the development of open banking, what have we seen and learnt?

Open Banking has been seen by some incumbents as just another regulatory box-ticking exercise, but in reality large UK banks are in an unique position to move beyond this to capitalize on digital opportunities that open banking can bring.

Open banking ecosystems — a key opportunity for UK banks — IT modernization and partnerships are key — both are powered by APIs and Services

Implementing open banking has created a new banking ecosystem in the UK, which poses great opportunities for incumbents to enter into new revenue and value streams. It has also identified the next stage in the open movement — open finance.

While the directive was implemented to encourage innovation and a greater choice for customers, and also replacing slow and vulnerable screen scraping techniques, there have been 2 key initiatives that have come to the forefront of priorities for UK banks as a result of Open Banking:

  • IT modernization
  • Partnerships

Both IT modernization and partnerships are needed to properly support open banking ecosystems and other digital opportunities, and both are supported by APIs and Services.

For large banks to not be outpaced and outmaneuvered by fintechs, they need accelerated IT modernization into modularization and lightweight environments — most are looking to a distributed microservices environment and a move to the cloud.

Once modernized, large banks will be able to act nimbly like a fintech, but leverage their existing trust, loyalty and capital to outperform new entrants in direct competition.

API Strategy Recommendation: import existing legacy APIs and Services into a catalog which provides a complete unified view of the current situation, and enables proper prioritization and acceleration of modernization efforts in a safe and secure way

Partnerships with other incumbents, fintechs and non-traditional players is also key to delivering the innovation that Open Banking was designed for. Of course, some banks are focusing on internal innovation to launch new offerings for meeting consumer demands, but for the majority partnerships are beneficial because they:

  • facilitate supporting functionality to be added to offerings without accruing technical debt
  • open up new revenue streams for offering unbundled banking functionality to other providers
  • aggregate external data for better personalized product offerings

The big UK banks seem to agree — HSBC’s Head of Customer Propositions and Innovation says that while fintechs were originally seen as a threat to be weary of, “Over time we recognized that some fintechs could build solutions much quicker if we developed them in-house… Now our preference is to build less and partner more. So there’s definitely more to come”.

And it’s not just HSBC — Over 3/4 (84%) of banks are considering new fintech partnerships currently, for reasons including supporting better customer experiences and increased visibility.

For large banks to capitalize on potential partnerships, it’s important for them to have a complete view of business and IT capabilities, represented as APIs and Services.

To read the full blog post, check it out here.

About the Author

Gemma Sindall
Gemma is a Marketing Manager at digitalML. She has a keen interest in digital strategy and the best ways to merge people, process and technology. Her experience spans Marketing and Client Services in the Technology and Financial Services industries.

Originally published at



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store



Large enterprises use our ignite Platform for digital recombination, APIs & Services at scale, Rapid IT Modernization, and Business & IT alignment