Technology has changed the way the world does banking. Whether it's a lending API to facilitate credit reporting or transaction software that tracks a user's past purchases, financial institutions and businesses rely on APIs to interact with their customers. Even so, many companies don't see the benefits that these services provide. A quick look at financial technology and APIs will help you understand how these systems work to create a better experience for you and your customers!
Financial Technologies and APIs
For the past few decades, financial institutions have turned to application programming interfaces, or APIs, to make banking transactions easier. These types of financial technologies (FinTechs) help different systems interact with each other. A FinTech can consist of software and mobile applications, covering every type of transaction from mobile payments to updating the blockchain.
With APIs, businesses can allow their systems to interact with other companies and organizations. For example, a customer using a banking API can check how much is in their account, make a transfer between them, and pay a third-party bill all from the same application. A lending API might aggregate data from the top three credit bureaus to help banks make more informed decisions. Various subsystems allow these functions to put financial control in the literal hands of customers!
Types of APIs
Software interfaces can take many forms, each serving to make other FinTech work more smoothly. Different organizations require various functions from their systems, so there are four main types of APIs that IT departments turn to:
- Open API: These programs are public-use software that helps people find what they're looking for. A library search engine is an example of an Open API.
- Internal API: A service made for in-house use only. A factory's database of products may use a specialized API for its staff.
- Composite API: These interfaces combine multiple services under a single umbrella. An eCommerce site may use a composite API for tying together past purchase information, current cart, and gift card balance data.
- Partner API: These systems limit who has access to the service. A lending API may allow only customers with credit access to private data.
While some APIs are developed directly as a partner or composite variety, many start out as private systems and become more versatile as they grow.
Types of Financial API Integrations
Banks and other institutions rely on many types of APIs to make business easier for their customers and themselves. Some of the more useful applications of this technology include:
Thanks to these services, Banks can work with their customers and other businesses without being restricted by in-person or paper-based communications. Instead of relisting the same information on loan forms, lending APIs can aggregate all of that data and input the information into the appropriate fields, reducing a lot of paperwork and back-and-forth interactions with the client.
The Benefits of FinTech APIs
With companies able to craft new financial services quickly and easily, more businesses are finding the value of financial APIs. This creates a more dynamic interaction with the consumer, making transactions faster and more convenient for everyone involved.
Using APIs, companies can streamline their services. A lending API makes it easier for loan officers to make important investment decisions with a lower margin of error. Customers can easily pay their bills with an app on their phone instead of going to the bank in person or talking to customer service on the phone. This frees up your staff for other important duties as well.
There's nothing that makes a client feel like they're in control of their finances more than an app that allows them to manage it. By giving customers agency over their purchases, bank accounts, and loan agreements, they can have a clearer picture of how their finances affect their lives as well. This means more responsible clients who value the control you give them over their own future.
Working with another company's internal software can be a big hassle. When businesses decide to join forces, a partner API may be just the thing to get their two networks communicating efficiently. If a lending API can gather information on a potential borrower, they'll have a better understanding of that client's spending habits and can make a better choice on how much credit should be made available.
Stay Connected with APIs
FinTech APIs are more important today than ever before. As more customers turn to their pockets instead of their desks for making major financial decisions, these services make it easier for businesses to work both with their clients and other companies. With the right API, your business can help create a secure and reliable path to your clients' financial freedom!