What is an API?
Application Programming Interfaces known as APIs, are defined by Oxford Dictionary as: “a system of tools and resources in an operating system, enabling developers to create software applications.”
To put it plainly, an API is a software “middleman” that connects pieces of software. NXTsoft CTO, Will Blackburn, describes APIs as a communication tool that lets you program on top of other applications in an interview on OmniTalk where he also gives specific API examples and uses.
APIs are important specifically in the financial technology (fintech) sector because they provide means for financial institutions to improve their business model by using APIs for client connectivity and integration. APIs essentially let software talk to software and allow for leverage of data functionality that make financial institutions more efficient in the digital landscape.
API Trends in 2021
Google’s State of the API Economy 2021 reports that digital transformation has been a top priority among businesses for many years now, but the COVID-19 pandemic and changing market conditions have increased the imperativeness. The report states that 75% of organizations continued digital transformation investments in 2020 and 65% of those organizations are increasing those investments or evolving strategies to become digital-first companies. Five keys trends in 2021 for APIs are:
Increasing SaaS and Hybrid Cloud-based API Developments
APIs are crucial tools in SaaS and cloud adoption which IT executives reported an planning to increase SaaS use to administer workloads and increase hybrid cloud adoption.
Analytics Expand Competitive Advantage
Leading organizations use API analytics to inform new strategies and align leadership goals and outcomes. Measuring API performance is key in optimization of API usage and illuminating further innovation routes.
Artificial Intelligence (AI) and Machine Learning (ML) – Powered API Management is Gaining Traction
AI and ML powered API security and monitoring solutions are gaining widespread implementation to assist organizations in detecting and thwarting malicious attacks. AI and ML are emerging as significant methods for organizations to fortify API management and security.
API Ecosystems Are Innovation Drivers
APIs are the backbone of digital business ecosystems that may be composed of internal parties or external individuals and organizations. High API maturity level organizations are more likely to focus on developing an ecosystem of new applications and connectivity around APIs.
API Security and Governance Are More Important Than Ever
In the wake of COVID-19 APIs provided many new opportunities for innovation, however unprotected and poorly managed APIs can pose a security threat. Increased investment in security and governance remain top priority for organizations to better leverage and protect digital assets.
APIs and Integration
Beyond facilitating connectivity, APIs process requests and distribute functions in a business digital ecosystem. This streamlines the process of integrating new application components and allows organizations to be more flexibles because digital design and administration is simplified and opportunities for innovation are increased.
It is essential for businesses and financial institutions to integrate APIs to keep or gain a competitive advantage through automated tasks and enhanced innovations. API integration is especially crucial for organizations that are conducting multiple cloud-based apps and tools. A study by Forbes concluded that typical enterprises use an average of 6 cloud apps. API integration platforms play an imperative role in the efficient and secure connecting of these apps.
APIs as a Product
Many organizations manage APIs as products. APIs are treated as an essential business product with full life cycles and long-term roadmaps that evolve to meet the needs of an organization. Google Cloud’s The API Product Mindset cites that organizations that treat APIs as products – not projects – are more likely to realize the potential value of APIs as business accelerators. API products provide ongoing leverage to organizations through using APIs for long-term value ad evolving them overtime to meet changing customer needs. APIs deliver more limited value in terms of extensibility, longevity, and reach when approaches as one-time projects. No matter where you are in the API lineup – the developer, the organization needing API connectivity, or a third party, strategizing APIs as products will increase the likelihood that APIs will provide strategic value and extensibility going forward.
APIs as a Service
Software as a service takes the cost of operations and change and transfers that cost from the organization to the developer or provider of that service. APIs as a service are ongoing in value and are up to the API service provider to maintain. APIs as a service allows for better integration and the organization is ultimately responsible for integrating the service provider into its systems to provide API connectivity.
It is especially pivotal for financial institutions to integrate APIs into core banking systems because open banking is here to stay. With increases in open banking in 2020, it is more important than ever for financial institutions to be able to integrate API services into their core banking platforms. It is in financial institutions best interest to partner with fintechs that provide API services rathe than to try to compete against them. NXTsoft's OmniConnect can allow for integration of third-party vendor services to any core system, core system to core system integration, as well as any third party to third party product, giving financial institutions their choice of best of breed solutions.
The Importance of APIs
APIs are integral tools for organizations of all industries. APIs allow the capabilities of one software to be used by another and also serve as means by which various programs can communicate. The API Academy lists several reasons why organizations should invest in APIs:
- Increase revenue
- Extend customer reach and value
- Support sales and marketing activities
- Stimulate business and technical innovation
- Ease integration of backend data and applications
APIs are the drivers behind a new movement of innovation. It is more important than ever that organizations across all industries learn how APIs can transform their business for the better. APIs enable businesses to perpetually increase growth at a faster rate, efficiently transform business processes, and allow for easier monetization and innovation.