Given the availability of capital – Fintech investment was over $3B last year – and the strong support ecosystem of accelerators and corporate venture teams, now is the right time for startups to create user-centric solutions with APIs to deliver innovation in 2015. In addition, forward-thinking banks have a similar opportunity to build out innovative products, and partner with Fintech startups, and leverage the same opportunities. I’ve worked at startups and banks, including Morgan Stanley most recently, in product and technology roles. I’ve seen that startups excel at adopting the latest technologies and building great user-centric products; banks possess great talent with domain experience, but often do not innovate or execute as quickly. Both startups and banks, however, can gain from using modern approaches, such as open APIs, and also learn from each other’s strengths in understanding key marketplace needs, and using UX design principles, by having the right dialogue, or even partnerships. From a technology perspective, legacy financial services providers are now moving away from older development methodologies (i.e. waterfall) toward Agile, embracing a shift from proprietary web services to RESTful APIs. Just as many companies are embracing open API’s (using providers, such as Apigee, to manage their APIs), my hope for 2015 is that startups and established players embrace the industry shift to open APIs (such as the 2014 launch of Yodlee® Enterprise API). Banks often struggle to embrace and create user-centric solutions (although a few of the better banks, such as Wells Fargo®, are strong at UX - with the right level of commitment and senior executives focused on user experience) and can learn from startups. Given the dual trends of design centricity and leveraging open services to connect with partners, what are some example of companies that are already doing this? The recent success of IPOs from startups, like Lending Club, received lots of press. But smaller innovators like Kabbage, Betterment, Acorns, Stockpile and FeeX are great examples of what can be done today with the right business focus and use of technology. 
While not receiving as much press, one company that’s making the right moves in this market is Kabbage, an Atlanta-based source of loans to the small to medium-sized business (SMB) market. Kabbage has succeeded by working with partners such as Stripe, Yodlee Interactive and Celtic Bank. The first two partners are known for the strengths of their API’s to facilitate tight integration of services, and their technology innovation. In addition, Kabbage is able to provide faster loan decisions, using modern technology, enabling it to compete and win share in the $500 billion + SMB credit market, that in turn has made it able to attract outside investment to fuel its growth. This speed advantage was highlighted by a NerdWallet review that compared Kabbage and OnDeck. Kabbage was praised for the speed of its decision-making for business owners seeking loans from $2,000 to $100,000, attributed to its technology platform. Its user experience (UX) is also highly rated by its customers. 
Betterment is another great startup story. I had met with them in 2013 when I worked in a partnerships group at Morgan Stanley. As someone who has worked in alliances, I think the company was smart to select Vanguard on products side (given the strength of its core business, and ability to manage costs), while innovating on workflows (where Betterment can add the most value, by automating portfolio rebalancing and tax loss harvesting). 
In terms of being user-centric and providing leadership at UX, a good company to look at is Acorns, whose product was described in VentureBeat as one of the best-designed apps. Banks struggle to get UX right, but while adding people doesn’t guarantee success, many would be smart to emulate Steve Johnson, Head of UX for LinkedIn®, who joined in 2009 a company of 400 people (across all of LinkedIn) – and runs a UX Team of 350 today! For ideas on how to deliver compelling user experiences, check out UX Crunch, a user experience blog focused on Fintech. 
Another innovative company to watch is Stockpile, which uses APIs to deliver stock to people in an incredibly simple way. Stockpile has partnered with Yodlee to help create the “gift cards of stock” product (as well as “invest your change”). It wins praise for its simplicity and ease-of-use. If only 529 plans, Roth IRA and 401(k)’s were this simple! Gartner’s Kristin Moyer recently recently reinforced the point that firms, like Stockpile, that use open APIs are showing themselves able to leapfrog financial services firms via faster development, and offering compelling experiences for individuals and SMBs. 
One final example of the trend is FeeX, which calls itself the Robin Hood of Fees. Just as Glassdoor and Brightscope broke new ground by shedding light on what it’s like to work at a compan and how its benefits stack up, FeeX provides transparency on bank fees. Check out this video featuring Uri Levine, Founder of Waze and FeeX at FinovateSpring 2014. URi shares an incredible story of entrepreneurship and the power of crowdsourcing at his talk at a recent Yodlee Interactive customer success dinner. I’d add that “transparency” is a great design point to start with, no matter how big you are in FinTech. For instance, Google is working in 2015 on making US insurance pricing more transparent and searchable (after doing this in the UK). It is a just matter of time until further price transparency comes to the financial services industry – and the space is wide open. By starting with design centricity, working with the right partners, and embracing open APIs, all players in Fintech can do this in 2015. Have you leveraged open APIs to build Fintech solutions? What do you think are the best-designed financial apps for consumers and SMBs? Contact Jenna Cheng at jcheng@yodlee.com with your thoughts we may include you in a future post. This is a guest post by Michael Halloran, a San Francisco-based advisor/investor to startups, who has worked as a banking and technology executive. He writes a regular blog on Fintech.
