How Does the Fintech and Banking Sector Use APIs?

Updated 07 Oct 2022
Published 12 Jun 2020
Rahul Mathur 2082 Views
Fintech App development


Many financial institutions around the globe have been immersed and influenced by the concept of open banking. The reason for its popularity is the rise in banking startups.

It is basically a framework in which banks and different establishments open their APIs (an abbreviation of Application Programming Interfaces) to permit outsiders to get to clients’ money related information.

It is utilized for creating fintech applications and new services around it which offers transparency alternatives to account holders.

In any case, one needs to remember that APIs are only one bit of the entire open financial environment.

It is this wide selection of open banking that propelled fintech organizations to concoct manners by which these financial APIs can serve the money related division.

Truth be told, this is one of the most compelling Fintech patterns for 2020 and for the coming future. Therefore let’s dig into the discussion regarding how the fintech sector utilizes APIs.

What do you mean by Banking APIs?

APIs are basically a bunch of conventions and codes deciding how different programming software and components ought to convey. They are utilized to impart distinctive programming applications to one another.

Because of the broad utilization of open banking now, the utilization of APIs in fintech has likewise become standard and they are being utilized to give orders to various third-party API service providers.

In addition, according to Insider Intelligence reports, APIs have been being used for associating designers with payment networks alongside showing charging details on a bank’s site.

They have become an important apparatus with regards to BaaS (Banking-as-an service), which in itself is a significant piece of open banking.

fintech apps in banking industry

How Banking Sector and fintech applications are benefited by utilizing APIs?

The benefits of APIs to the Banking sector and fintech applications are as follows:

Cost-effectiveness Increases:

With regards to offering plenty of different financial services, as much advantageous it is for all the users, it gets as costly or rather cost-restrictive for banking organizations.

This is the place we see one of the advantages of APIs for fintech. Be that as it may, open API advancement has ended up being a lifeline in such a manner since users would now be able to appreciate various services by means of various application integration.

For example, a user can without much of a stretch spare its financial data in third-party accounting software, tracking each essential data about the transaction and the same for one spot.

For a better experience data sharing should be promoted:

Already, banks were so possessive of the user data and a great deal exacting when it came to sharing the information.

Be that as it may, the landscape completely changed, basically in the European Union due to the second payment services directive and afterward universally.

Presently, users with full control of their information are in a situation to request banks to permit their information to be imparted to their ideal third-party provider.

Also, how is this encouraged? – obviously, by means of open APIs. This is only one utilization of APIs in fintech among many.

The coming future is APIs:

Since fintech application development is on an ascent, there is a low chance of API in banking patterns getting outdated.

There are many fintech new businesses developing now and again which just shows that the user requests are plenty for organizations to continue endeavouring to offer improved services by incorporating APIs and the sky is the limit from there.

fintech seeks in banking opportunities

Actually, an inquiry on ProgrammableWeb uncovered that there are 1956 Financial APIs while 290 were recorded during the first half of 2019.

Read Also:- How to Develop a Cash Advance App Like Dave?

More services are the result due to higher competition:

The development of APIs has expanded the competition in the market benefitting the customers. Because of this, the costs in the finance industry are going down compared to the assortment of services being advertised.

For example, clients can utilize finance service aggregators for looking at offers among banks and different establishments. In addition, they currently approach the offices which were just accessible in branches previously.

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APIs use Cases for Fintech and Banking Sector:

For Comparing Prices:

Websites like MoneySuperMarket which are prominent for price comparison have grasped the API economy so as to turn into a direct online wholesaler of various financial products.

The said site has constructed API service layers to control the flow of the website and permit business associations to develop.

The organization has a solitary perspective on its users now over their key communications, permitting them to serve better service and user experience.

Services like lending and exchange of currency peer to peer:

The network development of peer to peer was conceived out of the sheer need and interest for effortlessness in the procedures, particularly when it came to transactions.

Presently, there are a large number of peer-to-peer payment applications rendering services to customers by various financial institutions.

Presently this idea has at last been discovered in money trade. Since the sets of purchasing and selling currencies are circulated among the intrigued customers (with certain requests counterbalancing others, for example, a request to purchase dollars to be dropped with a future deal from another client), it gives a lot of chances to fintech organizations to grow.

benefits of implementing api

Proper management of Investments:

Prior to open banking, it was a test in itself for money related counsellors to accumulate the customer’s data so as to offer advanced services.

Presently there are APIs for proper management of investments that offer access to portfolio data of people, killing the need to conjecture or cobble together an image of customers’ benefits and total assets from various sources.

Market platforms for APIs should be created:

Seeing the uncommon fame of APIs, banks like BBVA showed a drive – BBVA’s API Market. This is a stage that offers a few sorts of APIs, apparatuses, and different services making it simple for engineers to construct an organization with the bank in the commercial opportunities.

Another significant player contending in a similar field is TrueLayer, a fintech startup planning to turn into the main provider for financial API development.

APIs for processing out payments:

Since it is a period of complete globalization, where even new companies are connecting with a worldwide customer base, there is a significant requirement for increasingly created methods for payment acceptance.

Decent variety in such a manner consistently plays to the advantages of the gatherings in question. There has been an increase in the options provided by APIs for payment processing wherein traders can easily accept payments without any problem.

This method not only helps in the seamless payment process but also smoothens the checkout process while shopping online.

White label services are offered:

In the market, there are many marked APIs that are possessed by different firms as of now. In any case, there are other white-mark APIs accessible also for banks and other fintech organizations to utilize.

These APIs permit them to use the advantages they bring to the table without the need to build up their own foundation and projects.

Future of APIs in the banking and fintech sector:

Subsequent to seeing the present gathering and utilization of banking APIs, the future appears to be encouraging mirroring the API mixes between built-up organizations and bigger networks something which will likely be facilitated on the infrastructure of third-party.

For example, future financial APIs may help banks in interfacing with web-based business sites encouraging the procedure of online installments.

Besides, they may coordinate with physical banks and stores to help offer to finance and loaning alternatives at POS areas.

For somebody who is keen on API monetary arrangements, picking the correct solution provider is a need. Arka Softwares has worked with different fintech plans of action and can streamline and alter API integration.

Rahul Mathur

Rahul Mathur is the founder and managing director of ARKA Softwares, a company renowned for its outstanding mobile app development and web development solutions. Delivering high-end modern solutions all over the globe, Rahul takes pleasure in sharing his experiences and views on the latest technological trends.

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