An application and programming interface (API) is used as a communication channel between online banking systems and third parties. An independent payment provider, for example, will be able to access particular data about a certain user through his bank account through an API. Of course, before this can happen, that provider will have to secure the customer’s consent beforehand.
The biggest benefit of API in an era where time is equivalent to money, is the elimination of repetitive steps when it comes to new customer verification. In other words, third-party financial providers will be able to move with greater ease and speed. After a successful online banking login, nothing else is required. A simple example is credit scoring, which can be completed in a matter of seconds, with data being accessible from a client’s bank account via the API.
While API’s are made with a variety of target solutions and uses, they are generally divided into four areas: plug and play; core banking; cards, wallets and transfers; and acquiring.
A lot of today’s biggest banks and financial institutions have been existing for more than a hundred years, but that doesn’t mean they’re not updated with technology. To make this a reality, API’s helped them.
With the rise of digital portals, it is now possible to conduct lending and investing transactions online. And certainly, behind these portals are API’s that take care of the information retrieval and updating procedures conducted with various databases. These same portals are also largely dependent on API’s for customer services, such as finding nearby locations, currency exchange, etc.
Peer-to-peer payment transfer programs are gaining ground, especially among younger people who have a preference for cashless payments. Bank accounts can be connected to these platforms via API’s, helping financial institutions increase customer satisfaction. With increased pressure coming from fintech and alternative providers on banks and other financial institutions, many organizations are resorting to advanced analytics to be able to meet the present and future needs of their clients. For instance, they may adopt fraud analytics solutions for more efficient theft detection, and the same technology can also be used to predict future needs of current customers. Such type of advanced analytical action relies on API’s to gather data from different databases and other sources.
Though most banks are using internal API’s for improved information flow between legacy systems, a good number of them are still trying to blend functionality from business their partners. However, API’s can deliver Innovation and functionality to the business by increasing system and data availability to outside parties, as well as establishing new income streams for both organizations.