For partners and third party developers, APIs 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.
Composable 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, chatbots 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 composable architecture allowing multiple integrations 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 decisioning
Fintechs are using APIs to automate and speed up credit decisioning by using third-party services to cover critical steps. Combining services like identity validation and credit ranking alongside internal insights into customer behaviour decreases new loan approval times from five days to one minute.
Opening up opportunities
Open APIs allow industry players like fintech 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 customisation 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 personalise 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.