Banks Shift Focus to the Future of Banking Industry: Open APIs
April 22, 2021
The COVID-19 pandemic has had – at least – one common impact across all industries: the need to offer a more personalized, digital experience for customers. One industry that has felt this shift the most is the financial services industry.
Consumers expectations and needs are evolving at a rapid pace. Meanwhile, businesses and banks are doing everything they can to offer leading apps and services to keep up. The driving force behind the ability to offer these new experiences is application programming interfaces (APIs).
Essentially, an API is predominantly software that speaks to other software. Consider PSD2 and open banking, for example. These technologies have already been available for three years in the UK, which has encouraged institutions to further utilize API data. In contrast, the U.S. has been slow to jump on board. U.S. banks generally offer limited private APIs instead of shared APIs.
Times are quickly changing, however. Commercial banks across the globe are realizing the need to adapt, adopt and take action. They are also seeing the importance of offering better features for seamless banking, adding value to their services and helping clients save time by reducing costs. These are just a few of the reasons why the industry has shifted its focus to open APIs.
Private APIs vs. Public APIs
While private APIs are far more common today, open or public APIs increase data sharing and communication between applications. In turn, this allows banks to issue a new set of products to customers. Ultimately, the increased connectivity and data integration provides the infrastructure needed for business banking to thrive at a whole new level.
Those using open APIs benefit significantly from:
Enhanced data availability – Armed with this data, banks can realign their services and make more informed decisions.
Better customer experience – Open APIs can enhance applications in many ways creating a more intuitive and satisfying experience for clients.
In-dept analytics – These APIs can provide valuable insight into an institution’s audience, user preferences, usage, traffic, etc.
Reduced costs – Regardless of the API used, development costs are a constant. However, many human tasks can be managed through automation APIs, saving time and resources.
Financial Institutions Invest in API Strategies
The benefits above are just a few of the reasons why financial institutions are currently investing in API strategies. As they move in this direction, they are also realizing the benefits of partnering with a fintech that has already built a solid foundation upon APIs. Bottom line: partner APIs are helping banks emerge as innovation leaders.
In the words of Clayton Weir, chief strategy officer at FISPAN Services Inc., Vancouver, British Columbia., “U.S. banks should…recognize that open APIs are the future of banking.”
Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of comparing merchant accounts. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie with ice-cream on his backyard porch, as should all right-thinking people.