Balance Sheet as a Service

offices to Fintechs. By embracing a platform strategy, banks can embed their core lending and other services into the emerging digital platforms transforming global economic activity. In this way they can generate new revenue streams and head off the need for digital platforms to develop their own financial services arms, which may compete with banks. The digital platforms have other things for their engineers to do than re-invent banking. “SWIFT is at the forefront of banking standardization and will continue this role in the new world of APIs. Banks should embrace the API revolution and take the opportunity to deliver balance sheet and other value added services through standardized modern interfaces.” Stephen Lindsay, Head of Standards at SWIFT The Transaction Finance API The first API standard that we seek to catalyze is an API consistent with ISO20022 and JSON standards that enables any bank to offer simple installment financing into a digital platform. As the digital economy grows, the appetite for responsible, on-demand financing will increase dramatically, presenting incremental opportunities for banks rather than zero-sum substitution with other forms of lending. The Transactional Finance API enables merchants to tap into large balance sheets through standard interfaces – much preferable to proprietary connections to smaller lenders. As banks find new commercial opportunities to finance purchases through the Transactional Finance API they may move on from a compliance mindset and may proactively look to address other forms of friction such a burdensome Strong Customer Authentication (SCA) mechanisms. There are a host of advanced and secure SCA methods available and coming online that can make the checkout process both secure and frictionless, if only they are adopted. Platform Future Globalization 2.0 is a world of digital platforms that will drive the next wave of global economic growth. These platforms will embed financial services and banks can position themselves for future success by publishing the appropriate retail and wholesale banking APIs. Many of these APIs should be standardized across banks because digital platforms will want to connect with many banks and not squander precious engineering resources on proprietary connections. There will be scope for value added, unique APIs from different banks on top of a base level of services. Platform lending is already a reality but largely driven by non-banks. It is important that banks quickly develop responsible lending APIs based on global standards, along with critical capabilities like instant lending decisions for existing and new customers. Banks can embrace a platform future by joining the development of the Transactional Finance API, connecting their balance sheets directly to digital platforms and powering the growth of the global internet economy. “Banks need to be able to deliver the core service of lending through APIs into digital platforms. Going forward that is going to be table stakes. To achieve this, banks will need to develop key capabilities, especially the ability to lend to existing and new customers on demand, and also to deliver a frictionless Strong Customer Authentication at the point of sale.” Jacqueline Morcombe, Global Solution Lead, Lending, Finastra “Banks are better positioned than anyone else to offer credit to their customers in connection with online purchases but their presence in that business is so far relatively modest. There is an obvious opportunity for banks to work with payments-focused Fintechs in order to get distribution for credit at merchant check-out.” Oscar Berglund, CEO, Trustly