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Open API banking: A powerful trigger for the value chain revolution in Japan
Abstract
This paper explores the concept of open application programming interfaces (APIs), which are drawing attention as innovative means of corporate collaboration and partnerships, and the possibilities of open banking enabled by the modularisation of systems and businesses using open APIs. APIs were once merely a manner of system development for highly competent software engineers. Today, the open API has become a business policy of outstanding business managers. In May 2017 the Japanese financial industry shifted to a new framework. The Amended Banking Act introduced a registration system for electronic settlement agency service providers and so-called third-party providers (TPPs) and announced policies of collaboration between banks and TPPs. Measures concerning the promotion of open innovation at banks eventually emerged as new regulations. This turned out to be a major shift in Japan’s financial regulations. API is a new communication path of information systems, but it could be misused. The outcome of discussions was a shift from the legacy screen scraping method to open APIs and token authentication. The open API will be a powerful trigger for the value chain revolution set to take place in the Japanese banking and financial services industry.
... Open banking, enabled by APIs, provides the foundation for the concept of "embedded finance," where banks can embed their financial services into the products of non-bank companies, offering seamless processes and increased convenience to customers [9]. The shift in the Japanese financial industry towards open APIs, which is expected to be a powerful trigger for a value chain revolution in the banking and financial services industry [10]. Finally, the transformative impact of artificial intelligence (AI) in finance and banking, highlighting how AI can enhance customer support, improve security through fraud detection, and increase the accuracy of credit scoring through machine learning [11]. ...
API-first banking is a novel approach to banking in the rapidly changing financial services industry, with a focus on using Application Programming Interfaces (APIs) to improve customer journey analytics and customer experience. Regulatory requirements, growing fintech competition, and banks' need to adapt to the digital revolution are the main motivators. API-first banking is now a revolutionary model that fundamentally changes how customer data is collected, analyzed, and responded to. This paper examines how customer journey analytics evolved in API-first banking architectures, illustrating how the shift from traditional banking architectures to API-based systems enabled it to gain unprecedented insights into customer behavior and preferences. With analysis of real-world deployments at multiple banking institutions, we demonstrate how API-first approaches facilitate real-time journey mapping, predictive analytics, and tailored service delivery at scale. We also reveal key technical and organizational barriers to API-first analytics adoption, including data governance complexity and cross-functional alignment necessities. This research contributes to the current body of knowledge on digital banking revolution through the presentation of a comprehensive framework for understanding how API-first approaches are revolutionizing customer journey analytics and shaping the future of banking services. This research paper aims to examine the revolution of customer journey analytics in the context of API-first banking, looking at how banks are leveraging data and technology to enhance their understanding and delivery of services to customers.
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