Much of today’s business world revolves around application programming interfaces (APIs), which deliver a better way to incorporate more innovation, share information, integrate multiple and disparate systems, and personalize services, thereby making digital financial services faster and effective.
IDC projected that organizations will spend $6.8 trillion on digital transformation between 2020 and 2023. In order to capitalize on these digital capabilities, businesses need to incorporate APIs into the process.
“The idea behind APIs has existed since the beginning of computing,” Deloitte in its API-Enabled Digital Ecosystems report wrote. “However, in the past 10 years, they have grown significantly not only in number but also in sophistication. They are increasingly scalable, monetized, and ubiquitous.
The broadening use of APIs is not for big companies any longer either. “You don’t have to be a tech company to reap the benefits of APIs, and they would particularly benefit small to midsize companies that now struggle to reach digital audiences through saturated and tightly controlled ad networks and e-commerce markets,” according to the Harvard Business Review (HBR).
Quite simply APIs used correctly form the foundation for digital transformation, but determining and connecting which APIs to develop and what products and solutions to enable requires a strategic approach.
Digital Transformation Across Commerce
APIs allow developers to assemble applications faster. Plus, unbundling software functionality into API-accessible business capabilities and then restructuring them to extend to open up new customer segments or extend their service reach, are key factors for forward-thinking digital companies, according to HBR.
APIs not only add navigation to mobile apps, authenticate customer bank account information and incorporate a patient's records with third-party billing but also helped Netflix achieve TV omnipresence and accelerated food delivery Uber’s presence. Tech giants like Amazon, Netflix and Spotify, among others, have also used APIs to introduce consumers to extreme personalization when shopping online, ordering groceries, watching TV or listening to their favorite podcast
But non-tech companies can also take advantage of APIs to fuel its digital business. HBR noted, "The opportunity exists in every industry. "
Regulations and standards encourage some industry sectors to offer APIs: European Union’s Payment Services Directive (PSD2) compels financial institutions and service providers to implement open banking technologies to allow customer-permissioned access to their data; the Fast Healthcare Interoperability Resources (FHIR) standard in healthcare describes data formats and elements and an API for exchanging electronic records; and the TM Forum Open APIs enable interoperability, open digital architectures and seamless end-to-end management of complex digital services in telecommunications.
Deloitte in its “API-Enabled Digital Ecosystems” report suggested APIs can package the functionality as an API product or attribute not anticipated by the API’s publisher such as an enterprise products and services firm launching a digital partner platform through a series of APIs. As a result, companies can directly apply for commercial products and services online using the firm’s digital properties or third-party partners.
As a result, API ecosystems have emerged. For example, innovative API integration has changed the entire food delivery industry. A global food delivery company could successfully integrate APIs, maps, analytics, restaurant directory, payment gateway, and push notification within its processes.
The API-enabled digital evolution now comprises mutual value creation that fuels platforms, marketplaces, and environments, proposed Deloitte.
The API ecosystem primarily consists of business networks comprising partners, individuals, start-ups, and customers that access services from a digital platform; and collaborators who create a new solution from these services and provides or sells it through an organization’s, or another partner’s, digital marketplace.
API-Delivered Financial Services
“Developer portals are incredibly important to the API economy because they are the API provider’s face in the developer's world. They are the first step in building an ecosystem,” Deloitte conveyed.
Financial institutions increasingly view APIs as adaptable tools that can enable business value. APIs are now the de facto and most important method to deliver financial services. The developer-first approach of API-based systems has allowed a new fintech generation to flourish. The first wave of this new generation focused on unbundling the consumer banking offerings, providing tech to financial institutions, and allowing the neobanks and challenger financial institutions to compete against slow-moving incumbents.
The API marketplace model lets financial institutions continue to provide and develop their core services, but also provides an opportunity for them to fill gaps within the product and service offerings they generate with selected allies.
This approach also levels the playing field for API providers. The marketplace increases exposure for API developers, especially those seeking a bigger fintech presence. For some providers, deploying to a marketplace can mean replacing their portals completely. They can also market APIs based on categories and how they interact with consumers, third-parties and applications. Choosing an API will consequently become more a case of matching features of the API as a product with overall need rather than picking an API based on just the technology implementation.
A trustworthy marketplace should fundamentally feature a straightforward interface with groupings and a search mechanism. It should also deliver all essential materials for the API such as documentation and sample code. However, it is also vital that an API marketplace contain a security component because of the troubling concerns associated with cloud security and an increase in cyberattacks within the existing cloud API market.
NXTsoft makes it easy to fold in APIs into the financial institution’s tech environment:
- NXTsoft’s Connectivity as a Service (CaaS) maps, implements, maintains, secures and services connectivity between a financial institution and the multiple ancillary components it wants to incorporate. NXTsoft works with an institution’s selected fintech vendors to ensure that systems transfer data exactly as they should, removing this headache from the financial institution.
With consumer demands shifting, more financial institutions are partnering with fintechs through APIs to deliver the services customers want.