How APIs are modernizing fintech

With so many services available, success in the fintech industry depends on placing customers at the center of business decisions. Banking executives and fintech leaders must not only stay on top of emerging trends but also continuously find solutions to the ever-evolving pain points of their customers. Financial leaders are struggling more than ever to develop a digital architecture that will better serve their clients' needs, boost their bottom line, and conform to the industry's constantly changing regulatory requirements. And APIs offer a good solution for that.

Application programming interfaces, or APIs, are specialized lines of code that act as communication tools by receiving requests, translating them into instructions, and responding to them. This ground-breaking tool makes data sharing possible in today's connected world. Digital behemoths like Salesforce and eBay created APIs to enable developers to access commerce data for various uses as e-commerce skyrocketed between 2000 and 2002. Today's APIs have made it possible for various financial systems to communicate easily with one another by paving the way for interoperability.

Unlocking the benefits of APIs

The financial sector is still working to comprehend the advantages of APIs. In fact, according to McKinsey, most banks are still developing their understanding of how API-driven businesses will operate. Banks are moving forward with API implementation in small steps and reaping the benefits. By developing new revenue streams and a more personalized customer experience, as well as by reducing costs and enhancing efficiency, it has been demonstrated to increase customer satisfaction and business expansion.

APIs can enable fintechs to incorporate new products and services to offer users a more personalized experience, increasing customer attraction and retention. Currently, open banking APIs are frequently used by fintechs, banks, and other payment services to connect to users’ banks and retrieve their balance while also creating a barrier between these entities, guaranteeing a secure data transfer. For instance, BBVA introduced its BaaS platform, Open Platform, in the US in 2018. Through APIs, Open Platform enables third parties to provide financial products to customers after successfully passing stringent compliance and security checks without offering a full range of banking services.

The service also allows businesses to connect to a central digital banking platform to access its APIs. Additionally, banks are using APIs to create mobile apps that let consumers use virtual debit cards for contactless purchases, quickly find ATM locations, and access account balances.

Slower payment methods, including paper checks, international wire transfers, and SWIFT, have paved the way for APIs in cross-border payment transfers. Particularly, APIs can aid fintechs in supplying the rising demand for fast, practical, secure money transfers. Additionally, APIs can be used to incorporate the remittance infrastructure into applications that already exist quickly. Although they have been around for a while, APIs are now crucial for businesses. When used wisely, APIs can completely change how your business operates by accelerating go-to-market strategies and enabling users to adjust to changing customer demands and market trends quickly.

APIs as a foundation for the digital transformation

In today's rapidly expanding and highly regulated market, APIs can help fintechs in meeting constantly changing compliance standards that vary by region quickly, giving them access to the nations that customers want to send money to, allowing them to launch new services into the market easily, and most importantly, facilitating the fast and easy money transfers between different platforms.

Consumers now expect their remittance services to be more transparent, secure, and fast in the digital world. APIs can be advantageous for fintechs, businesses, banking institutions, and startups alike because they require little coding to implement, offer secure methods of payment transactions, and speed up a go-to-market strategy.

Additionally, APIs are valuable for both the business using them and the overall customer experience they deliver. They can speed up data uploads and simplify automated application processes. APIs are a streamlined method of transferring business-critical data and are used to power mobile, web, and Internet of Things (IoT) devices. APIs are essential to digital and customer experience initiatives for companies of all sizes.

APIs can serve as the foundation for a company's digital transformation. Still, to do so, they must decide which API-enabled capabilities they require and the infrastructure their team will need. It will also be crucial to evaluate the outcomes of these efforts to improve your organization's API agenda and keep improving your solutions. API integrations are the solution for banks to satisfy their customers' needs as consumer preferences and international transaction standards continue to change.