There is no more doubt that the financial services industry is heavily dependent on technology. Software professionals will know that, given the sheer number of platforms and programs in use, integration protocols are needed to support the information exchange and access. Application programming interfaces (APIs) are making their way into most systems to enable this data transfer and support companies and products to expand.
Financial services APIs are opening the industry to developers, which in turn expand and improve services on the current infrastructure. Even though the process is slow given the security considerations, we see the rise of fintech products and companies from simple electronic wallets to full scale digital banks.
The expansion of financial services API
The main reasons behind API adoption is the considerable development time it saves, while offering reliability, trust and monetization capabilities. These are highly important in financial technology environments, as new services can rely and even gain from the reputation of traditional, well-known systems in handling security or authentication processes.
With the standardization of these functionalities – particularly as businesses and consumers move into cloud, mobile, and social platforms – an application’s reach is extended, translating into new business lines and revenue streams. In practice, developers use APIs as “Lego pieces” to create new apps based on existing services. From basic analytics and data feeds, to advanced authentication, authorization or storage and data processing, all can be integrated and managed with the support of third parties.
We see API’s at the core of the financial world today. Regardless if you are building a financial infrastructure, or a product on top of current systems, API’s are becoming a vital component for software development.
From a business perspective, you can either build APIs or use them. Building APIs allows development partners to contribute with new innovation and even new revenue models to your core business. Using APIs allows faster development cycles and reduces costs.
Let’s go through some of the main advantages APIs bring.
APIs allow companies to expand an existing platform or business model into new markets, or with new capabilities. For example replicating an email delivery service would be a major development cost. Email management is an entire challenge in itself as it should handle delivery, reputation and error management at least. Specialized solutions filled the gap in the market, and most rely on APIs. Code versatility via APIs provides business agility in the forms of lowered operating costs, shortened product time to market, and greater long-term revenue. The use of data analytics (an increasingly common feature) makes possible the tracking of user behaviour – top users, transactions by region etc. Businesses can then rapidly recognize and respond to changing customer needs based on precise data. The financial industry also heavily invested in these.
Companies have been trending towards cloud computing for some time. With the transition of products and services to the cloud, APIs are increasingly important in calculating business value given that they link backend solutions to the consumer web. The creation of a streamlined customer experience – combining product offerings, services, location data, banking and instantaneous e-payments – holds increasing weight as the mobile market grows. Financial sector has been prominent in adopting mobile technology as a cornerstone of business strategy. At its core is the proper use of financial services API.
An increasing number of customers are banking and shopping remotely. Financial industry stakeholders must secure software that can support services such as “capital markets, wealth management, retail banking and e-commerce transactions” anytime, anywhere, and on any device. By creating API driven solutions, companies can enable their own organisation to move faster when it comes to supporting new communication channels and devices. Making use of APIs demonstrates that a business is capable of changing its architecture to retain or expand its customer base. Particularly from a software perspective these organisations will be able to react to new technology faster.
Financial data management
The explosion in financial data volumes has heightened the cost and complexity of information management. Financial services API ‘s oriented towards efficient access of financial data enable data feeds to be processed easily. This simplifies the development as well as maintenance, and has direct cost benefits for end users. In the case of market trading for example, APIs have proved to be essential in overcoming cross-platform problems. Effective financial data management is also necessary for regulatory reporting – companies will find programming interfaces useful where disparate data silos exist.
APIs and the Internet of Things
The use of APIs translates into significant business advantages going into the future. The Internet of Things, and lately the new trend Internet of Everything, by definition requires physical devices be able to communicate with a main application or even amongst themselves. APIs are at the core of data exchange as well as cloud-based services, which are central to the IoT. With the number of ‘smart’ devices predicted to run into the billions by decade end, APIs will become indispensable. To gain some perspective, industry insiders have forecast the Internet of Things will reach over seven trillion dollars in market value by 2019, with an average of 6 connected devices to one person worldwide.
Valid concerns about the security, surveillance and privacy of the IoT have of course been raised. The risk of successful cyber-attack on the broad variety of devices is high given that development of inter-platform connectivity is outpacing that of security software. Security, then, should also become an essential aspect of API development just as APIs become the cornerstone of the future software development.
The financial infrastructure is being updated to support the technology of the future and APIs are at its core. Are you prepared for the interconnected financial world?