Is API in financial services: the key to the future?
Article by :Ravi Gupta (Digital Enthusiast)
What is an API? (Application Programme Interface)
API is the acronym for Application Programming Interface, which is a software intermediary that allows two applications to talk to each other. Each time you use an app like Facebook, send an instant message, or check the weather on your phone, you’re using an API.
What Is an Example of an API?
Let us take a familiar example.
Imagine you’re sitting at a table in a restaurant with a menu of choices to order from. The kitchen is the part of the “system” that will prepare your order. What is missing is the critical link to communicate your order to the kitchen and deliver your food back to your table. That’s where the waiter or API comes in. The waiter is the messenger — or API — that takes your request or order and tells the kitchen — the system — what to do. Then the waiter delivers the response back to you; in this case, it is the food.
The Architecture of Application programming interface (API) :- How its work and get configuration with applications.
How APIs Are Changing Financial Services and get connected with customers for better services.
The use of application programming interfaces (APIs) is presenting a world of possibilities to financial institutions. They enable the flow of information between applications and gives institutions the ability to easily access customer data, draw insights and create innovative products tailored to consumer, market and regulatory needs.
For partners and third party developers, they provide access to the core platforms on which they can develop more innovative products. End customers benefit from enhanced products, services and more transparency, enabling them to better manage their personal finance.
New entrants leverage lean and agile technologies like cloud services and APIs to streamline operations, innovate, enable automated processes and reduce the overall cost of doing business. Legacy bank systems are not built for this level of agility and it is this inability to swiftly respond to market needs that is holding them back.
Modular and Simple
The industry standard use of Representational State Transfer (REST) APIs together with focus on developer experience provided with sandboxes, developer portals and software development kits (SDKs) underpins the new technology. Using these tools, the learning curve significantly decreases and adaptability of the technology reaches new levels.
APIs empower in-house developers with the ability to innovate and add new features and functionality like custom mobile apps, chat bots or voice recognition capability to their ecosystem in weeks not years. New products or iterations of existing offerings can be rolled out, integrated and modified at a fraction of the cost and time it would take compared to a siloed system.
APIs enable a modular system architecture allowing multiple integration from new payment networks, customer-facing channels or custom-code for process automation to card processing services and other complementary cloud services. This gives institutions the flexibility to work with best-in-class providers in each area.
Data Security and Regulation
With API-driven systems, access to system data and capabilities is done solely through the APIs, offering significantly more security than manual or file-driven processes reducing the chance of human error. Single Policy Enforcement points can be introduced such as API management to ensure the integrity and security of information and govern API access centrally across systems. This is also an effective tool in combating fraud and enforcing necessary segregation of duty regulation given its ability to access and monitor information across systems.
Automated and Data Driven Decisions.
Financial services are using APIs to automate and speed up credit decisions by using third-party services to cover critical steps. Combining services like identity validation and credit ranking alongside internal insights into customer behavior decreases new loan approval times from five days to one minute.
Opening up Opportunities.
Open APIs allow industry players like Fin Tech vendors, software providers and developers to easily integrate to an institution’s banking and lending capability, encouraging new ideas. Not only does this help the institutions deliver an enhanced and personal experience, but it also offers a lucrative new source of revenue.
The New Norm
This technology allows for innovation and customization in scenarios that institutions cannot possibly predict. Almost like building an architecture without a precise end goal, APIs can take banks into different markets, open up innovation and allow the capability to build something unique. In time, the need to personalize services will become the new norm. APIs offer the best route to effectively meeting these changing needs, and and it will be necessary for institutions to fall in line or be left behind.
