API Technology Moves into Institutional Investments

Technology moves fast and slow. Weekly reports of developments in digital assets and cryptocurrencies this week show how fast new technologies can develop. At the same time, the news and announcements that caught my attention this week focus on good old application programming interfaces (APIs) gaining new uses to make the traditional world of institutional investing more efficient.

APIs are not new. I first wrote about them in 2015 for Independent Banker magazine. “The real power of API software lies in providing additional services for customers and data to customers. The newest use of APIs is to provide public access to private programming interfaces so that software systems can be connected for a real-time, “always-on” basis.”

It calls to mind how slowly technologies move into finance. Recent API announcements mostly concern institutional investments and trading, but the value APIs bring to clients is about what I described six years ago in writing about a connective technology for banking that was far from new even then.

“API software can connect both internal systems to external applications and internal systems to other internal systems. . . . Called application programming interfaces, or APIs, these software systems and code specifications make real-time, application-to-application connections that can help community banks gather and use the data they need from various systems.”

The crop of articles that appeared in investment and banking publications this week show how APIs are providing new capabilities to institutional investors and bank customers.

APIs and cloud services are becoming ubiquitous for data delivery, according to a Google Cloud research report on innovation in market data. “In fact, 68% of sell-side and buy-side users find it critical for market data providers to offer public cloud-based data services.” At the same time, the report continues, APIs, cloud services, and partner firms are enabling market data providers, aggregators, and trading systems to offer direct access to their data.

Institutional investors on the buy side are using API solutions to gain new capabilities with data sets they could not previously access. “A big one for us is delivering interactive analytics that our people can update on a split-second basis, so they can explore their ideas while staying in the flow. They no longer have to rerun a report and wait for the results every time they want to drill in on something,” David Li, Chief Technology Officer for Washington University Investment Management Company (WUIMC) told Institutional Investor.

APIs also power open banking solutions, and a number of product announcements support those use cases, suggests the Financial Brand in Why open banking is a must-have for U.S. financial institutions in 2022. “Customers are asking for better ways to manage their finances, and that’s the same everywhere in the world,” Aurélie L’Hostis, Principal Analyst at Forrester Research tells the publication. “Every consumer is looking for a better way, a cheaper way, a more convenient way to manage their money. Open banking and finance are about providing the affordable and useful services and products they need.”

Announcements from API providers across the FinTech spectrum include:

Nasdaq launched Data Fabric, “a managed data solution to help investment management firms scale their data infrastructure with enhanced quality, governance and integrity.” As Waters Technology put it, the “managed data infrastructure service presents an opportunity for firms to outsource many elements of their market data platforms to the exchange.”

Atomic, which provides an API to help banks and FinTechs integrate investing into their products, launched with $25 million in Series A funding, Finextra reports. “Capabilities include direct indexing, ESG investing, and multi-currency trading across 60 global markets.”

Iress launched a dedicated API data and trading solutions team “to support strong demand for market data and infrastructure solutions. This new global team completes the full integration of the QuantHouse business, acquired in May 2019, with Iress’ existing market data capabilities,” the company reports

Mastercard “completed its acquisition of Aiia, a leading European open banking technology provider that offers single and secure API access to banks and fintech companies, and enables users to easily perform account-to-account payments.”

Deutsche Bank, in the latest issue of its Flow publication, focuses on how APIs are enabling corporate treasurers to automate instant payments in the APAC region.

Hackernoon reports on the rise of Fintech-as-a-Service for payments. Powered by APIs, payments platforms are integrating multiple payment local payment solutions. The article sites Akurateco and Rapyd. Mollie is another example.

– Collin Canright