How does the fintech sector use APIs?
Over the past two years, one of the innovative directions in the global financial technology market has become APIs. You can read what specialists think about it here – https://www.qulix.com/about/fintech-api/.
It is a trend dictated by increased competition. And also by the changing needs of customers who expect the simplicity and convenience of technology companies from banks. Accenture estimates that by 2020, 7% of European banks’ revenues (or € 61 billion) will come from activities in Open Banking. In the UK, according to PwC, Open Banking could generate £ 7.2 billion in revenue by 2022.
API or Application Programming Interface carries out the transmission and provision of information. In simple words, it is a list of commands, requests, and responses. With their help computer programs exchange information with each other and interact. One can even say they are “forcing” each other to perform any actions. Using the API, for example, startups can receive banking data. And, on their basis, create high-quality and personalized financial services. Like Internet Of Things does – https://sumatosoft.com/solutions/internet-of-things-software-development.
ALT: A lot of colorful icons with the API written over them
Another example of using the API are mobile banking applications. Ones that allow a customer to check their balance or make a payment. Basically, to perform banking transactions directly from their mobile device.
A trend that is gaining popularity in the world is to provide banking APIs to all organizations intending to work in the financial sector. This approach offers many benefits for both banks and consumers.
For example, a universal mobile application, with the help of which users can see information on each bank of which they are a client. Now the user needs separate applications for each bank.
It is difficult to choose relevant offers and services provided by banks.
The multi-banking application allows users to:
- See balance online and conveniently manage accounts in different banks.
- Simplify trading operations. For example, choosing a bank for payment, a quick credit check, making a payment from the application.
- Install mortgage / loan applications that can confirm the solvency of citizens from a mobile device. Thus, to simplify the process of obtaining a mortgage or a loan.
As a result, customers do not need to use various communication channels to carry out routine banking operations. Banking becomes convenient, visual and comfortable.
Bank customers will receive new services and applications that will greatly simplify their lives. The quality and speed of existing services will also increase. Mobile banking applications will turn into financial advisors. They will teach clients financial literacy and how to earn interest on crypto.
They will provide clients with information about accounts and products in different banks. They will help make recurring payments and expand investment opportunities. In this case, the user himself will manage his data: it is he who will decide what information and with which bank to share, for how long to allow access. Open APIs are the key to creating a trusting environment. Both between banks and fintechs and between companies and their customers. And today customer trust has become the rarest and most expensive asset.
Open access to the banking API is also beneficial for banks:
- Expanding distribution channels for financial products and services. All this using third-party organizations and information systems.
- Expansion of distribution channels – potential for building up the bank’s client base.
- Banks will have access to information and services of third-party organizations. This will make it possible to better navigate the trends in the financial services industry.
- Finally, the open API will provide an opportunity to follow the new market from the inside. And even to outbid the organization behind the most successful developments in this area. This will strengthen its own position in the market.
Open banking is also beneficial for fintech companies. First, they need to reduce the time and cost of bringing innovative solutions to market. With open APIs, the technological integration of fintechs with banks is greatly simplified. For example, the smooth operation of emerging marketplaces.
As you can see, API brings benefits to all parties of the process.
So far, the only country in which the introduction of open APIs can be unequivocally called successful is the United Kingdom. The secrets of success are clear regulation and standardization of API. And also the initiative and support of the regulator, as well as mandatory implementation for the largest banks in the country. But in the United Kingdom, too, they are now thinking about how to make open APIs not only mandatory, but also attractive for banks. That is, to give financial institutions real tools to monetize this technology.
For other cases, there is only faith in the more wide implementation of APIs in fintech sector everywhere.
Rootmygalaxy a.k.a RMG was started in 2015 with a solo goal of Helping users with easy How-to guides. Slowly the website started sharing exclusive Leaks and Tech News. In these 5 years, we have been credited by the likes of Forbes, CNBC, Gizmodo, TechCrunch, Engadget, Android Authority, GSM Arena and many others. Want to know more about us? Check out our About Us page or connect with us Via Twitter, Facebook, Youtube or Telegram.