An application and programming interface (API) is used as a communication channel between online banking systems and third parties. For example, a financial service provider can obtain specific data about a particular user from his bank account using an API. Of course, before a banking API can do this, the customer’s consent must be secured.
The main advantage of API in a generation where time is money, is the elimination of redundant procedures in terms of verifying the identities of new customers. 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. Credit scoring is an easy example – the task can be done in seconds as data can be automatically obtained from a client’s bank account, thanks to 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 good number of the banks and financial institutions today have been around for more than a hundred years, yet they are up-to-date with modern technology. This is made possible for them with the help of API’s.
With the rise of digital portals, it is now possible to conduct lending and investing transactions online. And of course, behind these portals are API’s that facilitate the retrieval and updating of information from an entire range of databases. These very digital portals can also depend on API’s to help customers in different ways, such as currency exchanges, finding nearby locations, and so on.
Peer-to-peer payment transfer programs are gaining ground, especially among younger people who have a preference for cashless payments. With bank accounts being linked to such platforms through API’s, financial institutions are able to increase customer satisfaction. Because of the heightened pressure of fintech and alternative providers on banks and other financial institutioins, a lot of organizations are using advanced analytics as a way to address their clients’ current and future needs. They may implement fraud analytics solutions to improve theft detection, for example, or predict future needs of present clients. 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. But API’s have the potential provide innovation and functionality to the business by boosting their systems’ and data’s availability to third parties, and by laying down new revenue opportunities for the two organizations.