Techeest

Tech Talkies

Major Role of APIs in the Banking & Finance Sector

Role of APIs

API is the future of the banking industry. APIs are engaged in the business world for 20 years as it has become prevalent in banking as well as the finance industry.  Financial institutions are purely considering modern technological solutions for their work.

If you wish to stay updated and desire to stay ahead in the market, then one must know the use of APIs and how it works and how they are impacting the overall industry.

Besides this, so many Banking and Financial Software Development companies are playing their crucial part in developing impeccable software for both the Banking and Financial sectors using trending technologies.

What is a Bank API?

  • API stands for the “Application programming interface”. It is a group of tools and protocols used to develop software and applications. For banking, APIs provide access to programming experts to create an application that helps the financial institution to exchange data with third-party financial organizations.
  • APIs in the banking industries provide access to the financial institution to connect with other enterprises and consumers by transferring information speedily and increase the number of services they offer. As APIs have been popular in the banking and financial industry, it has been a wide scope of it in this market.

What are the uses of APIs in the Banking and Financial industry?

  • The use of APIs in banking has been recently popular in all other countries. However, API banking has already become mainstream in almost all countries across the globe. This means that there are so many financial institutions that are adopting this strategy and increasing their customer experience.
  • There are so many banks who choose to use API technology and offer API services to several leading countries like the USA and Canada. These are the open API which can be used by any company to gather information, collect financial bank statements, analyze the company’s financial position.
  • The best example which uses APIs technology over a banking platform is the HSBC group. It allows open banking APIs and private banking APIs which provides information such as details on business and personal accounts, branch location, ATM location, facilities such as loans, and commercial credit cards. These private APIs ensure the secure transition of information within the businesses and other parties to protect sensitive customer information.
  • With the help of this, you can change your offering for the better, by building stronger relationships with your consumers, and other enterprises.

Types of Application Program Interface

  • Internal banking API: The main purpose of Internal API is to carry out the internal things and operations within the bank. In-house developers are only given the right to access it.
  • Private banking API: The private API provides access to internal partners and other associates. This action helps banks in gaining the alliances within the various other businesses, B2B, etc.
  • External banking API: Public banking API is associated with the upcoming businesses and adoptions. It is majorly dealing with public affairs and stuff like such. It allows the sharing of data with a unified set of users with the overall control over the data.

What are the Applications of APIs in the Banking and Financial sectors?

Applications of APIs
  • Accounts and Deposits API: It deals with the specific domain of the banking industry. Activities such as account creation, details of accounts, various inquire to open a new account opening, minimum cash deposit, and many other similar aspects.
  • Payment Gateways: In today’s world, most of the people are preferring activities such as online shopping, trading, and they are asked to make the payment for the purchase. Hence for this, the customer chooses the banking system or credit/debit card to make the payment. Payment API helps the customer to make the transaction which is highly safe and secure. Other payment applications such as Paytm, GooglePay, etc. are utilizing payment API which is an advantage for both the companies and the banks. This is a hassle-free way to provide service to customers and led to a rise in the ecosystem of a nation.
  • Loans and Cards: APIs allow more transparency in the field of financial sectors. It made it easier for customers to get loans and credit cards.

What is the importance of API in the Banking sector and Financial sector?

To talk about the importance of API in the practical world, it is staggeringly fabulous. For instance, you can consider the recent past example of Yes bank which had been placed in a moratorium by the RBI (Reserve Bank of India). The lenders and payment-service providers related to the bank had to face serious disruptions and blockage of payment services as they are using API services. But the chief executive officer of Razorpay has examined the fact that the Yes bank has the best API networks in India which saved from direct impacts of banking services and helped to cope up with interconnected participants.

How is API utilization changing the game in digital world?

We can observe that the increasing demand for API utilization is due to the rapid increase of wireless devices in the digital world. You would find 2 out of 4 people using a smartphone and obviously, they will look for the banking applications that could help them complete their needs in just a click, eventually saving their time and money.

This is where the demand for API increases because all the mobile apps on the devices would work just because of API. The banking services which you perform through your mobile apps today are possible due to none other than the API.

These services would stay dominating as the customer can perform his transaction from anywhere and anytime in the world. The benefits of mobile apps related to the Banking and Finance sector are so many. These inspire companies to focus on enterprise operations and propel business growth.

Conclusion

The development of API and its uses were mandatory for the banks. Relevant applications developed by the banks help the customers to grow and make things easier for them. 

APIs for online banking offer benefits, due for this reason many financial institutions have executed them. Adapting to technological strategies at this age is essential if you want to stay on top of things.

The increasing number of wireless devices has turned the traditional banking approaches into digital ways. This ultimately increased the demand for API utilization.

In a nutshell, we can say that the API would play an indispensable role in reshaping the picture of future banking and financial services.