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May 21, 2019

Everything You Need to Know About APIs and How They Relate to Banking


Mobile Banking | Security | API | Online Banking | Core Banking

APIs (application programming interfaces) are simply communication tools for software applications. APIs are leading to key advances within the banking industry as financial institutions continue to collaborate with third parties.

What Are APIs?

Simply put, APIs are software applications used to develop other apps that connect to other firms’ pre-existing technology. By using APIs, banks can offer a more seamless, efficient customer experience. In turn, innovative solutions are created that solve specific banking problems. Problems such as a high number of failed payments, noncompliant or inefficient international payments, managing internal roles and responsibilities, changing or canceling payments on short notice, and more.

There are currently three types of APIs, all of which provide a gateway to more innovative solutions. These include:

  • Private APIs — Most commonly used within the traditional banking organization, private APIs help enhance operational efficiency and are viewed as essential by the vast majority of banks.
  • Partner APIs — Typically occurring between a specific third-party partner and a bank, partner APIs allow for expansion, especially in relation to new channels, products, etc. For example, through an API partnership, a bank could work with a separate third-party company to automatically create loan documents in relation to loan applications. This would also allow the bank to automate loans, increasing efficiency. Most banks will gradually transition from private to partner APIs.
  • Open APIs — The least commonly used type of API, this structure involves making business data available to third parties. In this case, banks are often concerned with the security of data and other sensitive client information.

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The Link Between APIs and Financial Institutions

If you’re currently in the banking industry, you know that your customer’s experience is imperative to your success. In today’s digital banking age, banking applications are in high demand. After all, the public wants an easy-to-use experience that offers the latest digital services.

One key study recently found that out of the 2,000 Americans surveyed, 31 percent use their mobile banking app the most — more than social media or weather apps. The demand is increasing so much that 91 percent of users prefer to use their banking app than to physically go into a branch.

Banks are now taking advantage of APIs, as they add new revenue streams, increase access to additional customer data, encourage future innovation, and more. They also support the development of new distribution channels.

In addition, by taking advantage of APIs, banks can provide a deeper, more efficient experience for their current and future customers. This is particularly true of the customers' ability to seamlessly interact with various service providers. Overall, APIs improve the customers' experience based on greater freedom, flexibility, and personalization.

By offering customers a powerful lineup of banking solutions, your bank can become an unstoppable force of function, speed, and efficiency. Whether you’re interested in a core information module, an all-in-one banking machine, or a more efficient wire transfer system, FPS GOLD assists financial institutions by providing state-of-the-art banking software. Our powerful APIs allow for customization that can meet the needs of any bank.

Examples of APIs in Banking

There's a reason why API-based products are gaining so much traction within the financial marketplace, as customers demand more immediate, seamless banking and payment options. After all, the way customers interact with financial institutions is rapidly changing.

Just a few key examples of banking APIs include analytics, account authentication, account information, payment processing, and even loyalty programs.

Banks are using APIs for one or more of the following four main reasons — reach, speed, domains, or the Internet of Things (IoT). In turn, operations become more efficient, and all parties mutually benefit.

For example, a bank may develop a mobile app that allows customers to access their account details as well as information about ATM locations, branch hours, etc. In order to optimize their app, they would need to use an API to connect with a third party. This would allow the bank to offer even more features, such as information on credit scores, mortgage tools, etc.

From making it easy for customers to check their credit scores to using mortgage tools, the API methodology has many applications within banking.

Another great example would be FPS GOLD's API associated with our partner, MX. By creating an API that specifically works with MX's account aggregation product, banks that offer mobile or Internet banking can provide their customers with a much better experience. With the ability to see their spending habits through a simple, digestible dashboard, customers can get the most out of their banking services.

APIs also make it easier for banks to partner with major credit card companies, brokerage firms, and other large corporate clients who streamline and optimize the customers' experience. The end goal is to drive more business and obtain new customers — all while ensuring current customers are satisfied.

Interested in more information? If so, fill out this form.

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