The customer’s experience is truly imperative to the success of all banking institutions. The banking customers want an easy-to-use experience that offers the latest digital services. Given the intense competition in the financial markets and the changing needs of the consumers, banks all over the world, make it a point to leverage the latest technologies. An API or application programming interface can be defined as a technology protocol that allows diverse software components to communicate.
Nowadays, banks are now taking advantage of APIs to add new revenue streams, increase access to customer data, encourage future innovation, etc. APIs also support the development of new distribution channels. Thanks to APIs, banks can provide a more efficient experience for their current and future customers by allowing them to interact with various service providers seamlessly. Conclusively, APIs efficiently improve the customers’ experience based on greater freedom, flexibility, and personalisation.
Open Banking and APIs
Open Banking is one such system that involves the use of APIs, that enjoy access to the core system of a bank. Through efficient use of APIs, the Open Banking system ensures that the businesses and consumers enjoy easy access to custom banking services and also promise complete safety along with enhanced efficiency.
The main benefit of using APIs is that they can then be used by 3rd parties within their organization/platform or can even be offered to the consumers for a more personalized banking experience. An Application Programming Interface enables a 3rd party application to use an interface through which it can easily access a standard set of tools or services. Using APIs thus helps a bank offer 3rd party access to its customer services. With APIs, multiple 3rd parties can then use beneficial banking services or also offer the same to their customers.
The use of API technology provides greater flexibility to banks. It also helps banks build the kind of product customization and experience that their customers expect. APIs allow even individuals with the non-tech background to develop applications that make use of whatever software components it taps into.
Importance of API Banking for Bankers
All customers pose different needs and interests when it comes to banking services. While banks offer standardized services to all customers, the use of APIs enables these services to be customized for the individual’s needs. API backed banking services allow customers to feed his or her data into those applications as he or she chooses. The API services offer easy access to core banking data, which helps in eliminating barriers between businesses because all of them have access to the same data. Ultimately, this helps in the overall growth of the financial industry, along with improving the quality of services available.
Most customers appreciate the convenience of doing all these things whenever they want and wherever they want. The APIs are responsible for moving banking from physical, brick-and-mortar banks to digital-only ones allowing real-time functionalities for customers. As users demand more from their banking apps, whether it is about making payments, learning about specific bills in detail, or keeping track of their finances, leveraging APIs is the best retort for banks. All in all, APIs allow financial institutions to provide desirable features to their customers. It’s fair to conclude that the development of APIs and their connection to banks help customers in several ways. Customers can save time on transactions, avail a service and product they may need, conveniently facilitate all operations, and offer practical and straightforward solutions to every problem.
Open banking APIs promise high profitability for financial institutions. Notably, small to medium scale banks are significant beneficiaries of API technologies. While smaller banks may lack the technology necessary for specific features, using APIs from fintech can help them cover up their flaws. Strategic partnerships help small banking companies to provide improved functionality, increase their brand awareness while improving their customer experience.
Current API Trends
The core framework of the payments and retail banking market is fast transitioning. Multiple new players are building on top of existing bank infrastructure to create exciting new digital products and services to please the end customers. Looking closely, it is easy to see an entirely new set of activities in the banking value chain that has emerged between banks and customers.
Two massive trends have recently emerged in the banking markets. Firstly, banks as API platforms will supply enhanced data-driven services based on internally derived data. This trend serves as an indirect customer relationship model, but the bank is not entirely invisible to the end customers. Second, banks also act as third-party service providers, offering products and services that integrate information derived from multiple external sources via APIs. This makes the direct customer relationship model.
API Opportunities for Banks: Moving Forward
While the introduction of technological trends such as APIs has already caused a shift in financial services, new regulations are set to accelerate the industry’s transformation. APIs are transforming the banking landscape and redefining the role banks play in a value chain. This marks a shift in the traditional banking strategy that is aimed at offering a full range of products to a wide range of clients. It required infrastructure and back-office support under one roof for banks. Massive integration of open APIs in the banking sector will bring forth a significant decline of fully integrated universal banks. APIs are harbingers of a process of opening up and unbundling the banking process. The forecasts predict the onset of a new value chain that will yield a very different financial services landscape.
In the times to come, banks will offer customers an array of robust banking solutions. Customers relish the unmatchable force of function, speed, and efficiency when it comes to banking services. For example, Finezza is a software and platform that comes with secure APIs and data pipelines that can be easily integrated into different banking systems. One unique feature that makes Finezza stand out among the rest is that it has every financial institute’s security needs factored in with its data-access controls.