How APIs Are Driving Change and Creating Opportunities in Financial Services

APIs allow access to siloed data so businesses can offer personalized services to clients

Financial services are evolving fast. According to recent research, 42 per cent of UK adults now use at least one FinTech service and over 20 million people use banking apps. Today, people are comfortable banking online and customers are increasingly demanding unique and personalized services that mirror their transactions and user experiences in other industries such as retail. Responding to this demand, many financial firms are using application program interfaces (APIs) to deploy a suite of advanced financial services and products that are driving change and creating opportunities in the financial world.

What are APIs and how do they function in financial services

APIs play a central role in threading together information and data between organizations without the burden of merging their individual operational systems. APIs allow siloed systems and data to communicate with each other and increase the ability to develop products quickly and agilely that are more tailored and personalized for their users. This saves time and effort, and—more importantly—money since APIs help to decrease the time to market for new products. As APIs increasingly open and develop these communication channels between financial institutions without the need to overhaul their existing infrastructure, they are driving the transformation of financial products and services forward.

The potential of APIs to drive change

Innovation is all about finding new ways of doing things and discovering novel solutions to known issues. Organizations are leveraging the power of APIs to unlock a wealth of opportunities, from personalized financial services to complete banking ecosystems that are at the forefront of technological integration and product development. Businesses that take an API-focused approach to their financial services find that they are more adaptable to their specific client requirements since they can assemble new products from existing services and then quickly deliver these new services to market. For example, rather than offering payments and foreign exchange (FX) as two separate services, they can be combined into a single, simplified process with fewer steps. 

Fintechs and banking infrastructure providers lead the way

APIs are allowing organizations to source specific features and services from third parties. For example, if a financial provider or a business sees an increase in customer demand for a specific service, such as virtual IBANs for example, but they lack the internal resources to build an in-house solution, they can source a white-label service from a third-party provider. By taking this modular approach to their products and offerings, organizations can continue to offer complete services to clients. Additionally, they can be highly responsive to their customers’ needs and deliver new products to market quickly and at cost.

There is growing collaboration between financial institutions to facilitate access to valuable shared customer data and leverage this information to deliver a better overall customer experience. For example, with the customer’s permission, an API can access and analyze their transaction data and identify the most suitable financial products to offer them. Then the financial institution or business can use a white-label service provided by a third-party to fulfill their customer requirements, such as a multi-currency debit card, additional payment methods, or a digital wallet.