Application Programming Interfaces (APIs) will be the springboard that propels the future of banking via fintechs. Today, APIs are arguably one of the most important tools that will allow companies to achieve scale economically, especially within the fintech sector. And, if revenue from fintech companies will surpass speculation and triple in the next decade, it’s time to learn what they are and why they’re valuable.
APIs enable connectivity between servers, applications, and databases from different companies, allowing them to interact. They streamline development processes allowing developers to connect platforms and build upon functionalities rather than manually build individual features from scratch.
This is particularly useful where fintechs are concerned because financial institutions can share data with third parties who can integrate databases and offer services beyond the banking provider aimed at efficiency. Today banks can plug into fintech firms and vendors to piece together packages of flexible services to keep up with a customer who is constantly seeking increased efficiencies and the freedom to bank quickly wherever they stand.
The uses of APIs in financial services are limitless and, today, make up the core of payments and e-commerce programs, allowing users to send and receive money through platforms such as Square and PayPal. For banks wanting to keep up with the technological revolution, APIs will be the place to direct their attention and reap immediate rewards in customer retention. It is a win/win where financial services companies who use APIs will be able to expand upon their services while customers are able to access more functionality without having to change institutions. Today, banks, insurance agencies, and finance institutions who don’t embrace the modernization offered by APIs will fall behind in a rapidly innovating environment.
Since the banking world was revolutionized after the Open Banking U.K. regulations encouraging innovations in the sector in 2010, it was found that being embedded into consumer experiences effortlessly was a key path for banking institutions to become both a platform and an ecosystem. Banks who manage to offer their services whenever consumers need them will keep ahead of the pack. This adaptability is powered by APIs.
APIs are not without their challenges. Certain banking technologies may not integrate well with APIs in some cases. In others, security concerns threaten plugging an unknown API into a trusted banking institution. However, while challenges exist with every opportunity, it is undeniable that the unlimited potential of API functionality for the improvement of banking services outweighs the threats.
Banks simply need find ways to adapt and integrate safely, mitigating risks at every step. It is not possible today to attract all users to digital channels alone. The future of banking is to find ways to be embedded in as many applications as possible where users may require financial services.