APIs and Their Impact on Fintech
The advent of Fintech APIs has dramatically transformed the financial sector which was historically not open to change. The result of the rising adoption and use of APIs throughout the finance industry has led to the innovation of new business models, apps, and services.
Before we move further, let us understand the following-
- APIs: APIs are an abbreviation for Application Programming Interfaces that allow different systems to interact with each other.
- Fintech APIs: In Fintech, APIs enable easy access to data among the various parties involved in the financial transaction procedures. These include banks, consumers, business websites, and third-party providers.
- Examples of Fintech APIs: Different Apps for obtaining weather forecasts, and finding flights and hotel room bookings all utilize real-time data access enabled by APIs.
Although, the traditional banks maintaining customer data was not readily accepting the use of APIs. However, the past decade saw European and Asia Pacific nations issuing certain legislations that required banks to adopt this new technology. The banks were required to create APIs that allow third parties to access customer data with their consent.
The transition from conventional towards open banking spread globally resulting in the birth of innovative and dynamic companies powered by Fintech.
Impact of APIs on the Fintech Industry
The growing impact of APIs on the Fintech industry is easily understandable.
- Financial service providers and banks must focus on collaborating with third parties to expand their business offerings and stay competitive.
- Moreover, APIs can help merchants to enhance their customer’s payment experience. Customers of the digital age want to transfer funds, make purchases and manage personal banking with the ease of their mobile phones.
- Similarly, APIs enable developers to build financial apps and services in a faster and more cost-effective manner.
How APIs serve as Building Blocks for Fintech Industry
It has been witnessed that global tech leaders attribute their success to the strategic focus paid on the use of IT services. The provision of Apps and services for third parties to incorporate into platforms their customers has led to the growth and development of their business. APIs serve as a vital component in the execution of this micro-services strategy.
The rapid transformation of the global financial ecosystem is indicative of the increased adoption of APIs in the industry. The use of APIs is not limited to any one sector in the financial industry. The utilization of APIs is driving various industrial sectors towards innovation.
The Fintech APIs are proving to be advantageous for the following sectors-
- In the payments and E-commerce industry, Fintech APIs allow consumers to accomplish various payments and transactions through online platforms.
- Banks make use of Fintech APIs to provide their customers with safe and secure digital and banking services.
- Banks as a Service (BaaS) APIs allow third-party Fintech firms to easily access banking data.
- The Fintech APIs play an important role in the integration of accounting operations with other business functions to increase efficiency.
- Fintech APIs enable third parties to provide digital services that utilize real-time market data from a wide range of sources.
The Fintech APIs serve as building blocks to avoid recreating already existing financial functions thereby saving time and costs for your business