The popularity of API banking systems is driving more and more innovation, particularly among fintechs. Major players want APIs to be successful in this space.
Banks are accelerating the adoption of API technology to improve transparency and increase customer satisfaction.
By opening up bank account information to third-party service providers, API Banking allows financial institutions to provide a seamless digital banking experience.
The API Banking service lets you offer new digital services to consumers and businesses in ways you never could have imagined and make your products and services more profitable. With API banking, you can apply for a loan, transfer money between countries, and pay bills all from an app on your smartphone. Your service can be used to do whatever you want it to. There are no limits.
Banks around the world recognize the potential of APIs in transforming financial services. In 2015, a survey by software firm Fundica found that nearly 60 percent of banks had already deployed or were planning to implement APIs by 2017. Accenture said that 34 percent of financial services institutions had started using APIs and predicted a rise of 56 percent by 2017.
Effectively, financial institutions have already experienced the disruptive power of digital innovation and are reaping its benefits. Financial services that leverage APIs as the primary way to draw value from external data have a competitive edge over their competitors.
Technology-Banking is driving innovation because it inherently drives market disruption. Innovation comes from combining technology and business in new ways that solve problems or create value for customers and businesses.
The trend is further accelerating with the introduction of API (application programming interface) enabled bank services and technologies. This has turned bankers into masters of their fortune and also empowered them to contribute significantly to the global economy through innovation and entrepreneurship. Not only that but they are empowered by it because it enables them to innovate faster and more efficiently. The creation of new banking services has become possible due to open-source software (OSS) standards and ecosystems that allow for the seamless integration of new services.
The term “API banking” is popping up in conversations across the industry — and this is hardly surprising since banking is a sector that continues to undergo continuous innovation.
API or Application Programming Interface is a set of networks and protocols that allow machines to communicate with software or the internet. More than just a communication protocol, APIs are responsible for bridging the technological divide between specialist software and non-specialist software applications. With just a few lines of code, an API can be transformed into a working solution for your business requiring high availability and distributed systems, automatic failover between clusters, and the ability to message other computers on the internet using your domain name.
Banks now allow third-party platforms to add more value to their user and open up new business opportunities based on the API Banking Technology that is transforming the financial industry.
The banking industry is continuously growing at a fast pace. Innovations in the banking space include API-first banks, banks that serve as developers, and more. Even large institutions are no longer satisfied simply by serving their customers.
It’s no secret that financial institutions are using technology to improve their services and their bottom line. However, with so many different companies using the API space for different purposes, it can be challenging to understand each service’s impact on the global economy. API Banking–the use of an unstructured, interconnected set of Internet services and businesses as a way to improve financial services delivery–is one-way banks are trying to create new economic systems that support a diverse set of customers while reducing their vulnerability to disruptive changes in the financial sector.
There are several reasons why API banking is becoming the wave of the future. The first and most obvious reason is cost reduction. Companies can automate customer support and other processes with the aid of an API, improving the quality of service provided to customers while lowering costs. A good example of this is how Facebook keeps track of your emotions using an API, which allows the company to offer customized content based on your mood or situation. In turn, this allows users to have more interaction with the companies they already know and trust, making them more likely to do business with them.
The Internet of Everything (IoE) revolutionized consumption three years ago with the arrival of smartphones and the apps that came with them. This has given birth to a new kind of industry – one built on APIs. An API (application programming interface) is just a way to get software or internet services to work with your company’s systems. When you need a new way to buy something from Amazon, for example, you don’t just request a shipping application – you also make an API request. The company can fulfill that request – send an email with tracking information about your order, or deliver the product to your doorstep – because it understands what type of product you need, and has information about your purchase via a previous API request made by someone else.
While the financial industry has been focusing on increasing its transaction capacity and providing better services, local financial services providers have also seen the need to innovate to stay relevant in their local markets. And one of the most effective ways to do so is leveraging the increasingly powerful Internet of Things (IoT) technologies.
Due to the increasing popularity and utility of APIs, financial institutions are now seeing a need to create better user experiences.
The use of APIs and the integration of machine learning and data science into financial services hasn’t been happening in an inertial way. Innovation is accelerating in the financial sector because of the increased utilisation and wealth of information available from these systems. Banks are making use of this knowledge and using it to make risk assessments more informed and efficient. For example; by using machine learning technology to analyse credit default risk they could reduce their investment in vulnerable clients and increase their returns on asset protection.
The banking industry is undergoing a historic disruption as FinTech startups redefine how traditional banking is done, inside and out. Payments are the heartbeat of any bank, and vital to their security. Banks must get in front of these changes and find ways to successfully leverage all this innovation. Although FinTech companies are moving quickly to build technology solutions and expand their customer base, existing infrastructure providers have not kept pace with this change. As a result, they will need to dramatically improve speed.
Banks and payment service providers (e.g. Visa, MasterCard) are exploring ways to modernize their infrastructure to offer better customer experiences.
In conclusion, the banking and finance sector is doing a lot of work to simplify their systems and make them more agile. Simple and open API-centric architectures can drive down costs, improve business agility and make systems flexible.