With evolving technological advances and increasing consumer needs for transparency, banking systems need to develop simultaneously. Also, financial institutions and companies continue to develop and progress during this time of increased transparency, and authorities are taking innovative steps to ensure that consumer privacy and data protection is vitally implemented during business activities that are especially executed by banks.
What is API Banking? Why Organizations need it today?
API stands for “application programming interface” these are a set of tools that build applications and soft wares. APIs enable programming experts to create applications that allow financial organizations to exchange data and consumer details with a third party who deals with finances and technology. In API banking, third-party arbitrators, along with banks, simultaneously enhance their specialties and include incentives so customers avail of their services so that they can offer more ease to their customers at a predetermined price.
API banking makes financial transactions with third party companies easy and efficient. By sharing customer data that is essentially valuable for third parties, customers largely improve their overall financial transactions experience.
Example
An API has the necessary tools needed to analyze customer financial transactions, which help banks determine which financial deals or offerings suit a particular client or group of clients. Banks can then offer that client or that group of clients deals such as a low-stake credit card or a high-stake savings account, or even a product under a loan.
Three Types of APIs
1.Public APIs:–
These soft wares are still not very common. They are involved in making data of businesses available to third party financial vendors.
2.Private APIs:-
This is only available within the same company or institution. It enables the improvement of the internal process.
3.Partner APIs: –
This software permits access to the bank’s own preferred third-party vendor. These partners pool ideas for expansion or use the banks’ own platform to offer services.
The popularity of API Banking
APIs became very popular quite recently. Especially from January 2018, when the Revised Payment Service Directive (PSD2) was employed in Europe. PSD2 has allowed financial vendor technological companies like fintech and service providers online and vendors to procure data from financial organizations to evolve their own services and apps for customers.
In conclusion:
APIs are becoming more widely accepted and used by financial organizations across the globe. According to Hank Gonzalez, this transcendence into a future where financial institutions will provide data to connect with businesses and customers more directly in a secure and convenient manner will boost available services and products. Such a transformation within the banking system will result in a conducive outcome for the banking systems’ future.
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