The whole world of Fintech is multifaceted and diverse, and the APIs are the little parts that help it to become more interconnected easily. Fintech API empowers the payment process, verification, data aggregation, and sharing, and much more.
In another sense, open banking API execution frequency increased five times more in the last half-decade. Application Programming Interfaces (APIs) in Fintech are transforming the fintech industry resistant to updates. The increase in adoption and use throughout the financial sector has resulted in the explosion of new services, apps, and business models.
In this article, we will precisely learn more about what a Fintech API is, how it works, its benefits, and more. Let’s dive in then!
Fintech API- An overview
An API allows different networks and systems to communicate with each other. While considering financial technology (fintech), will help data access for the systems involved in financial transactions, banks, third-party providers, consumers, and websites.
Have you ever wondered about how your credit card is approved while shopping from Amazon? Or how different wallet apps can retrieve money from your account? All such transactions are because of different Fintech APIs.
API is the bridge that allows various software to communicate with each other and necessary user data. For instance, a finance app can utilize an Open Banking API to connect with the end user’s bank account and retrieve the total balance.
Moreover, APIs are becoming essential because it helps independent platforms to interact easily. The platforms can be made up using different function calls, unlike programming languages, and other specifications or languages. So, to make them interact with each other, an API will act as an interpreter.
APIs also allow safe data exchange between different systems without revealing their core logic; which is an important factor to take care of for maintaining financial security.
As the popularity of open banking APIs has increased, governments worldwide are taking initiatives to implement Open banking more.
There are certain predictions made in the McKinsey article which says that by 2030, the cloud technology feature can become prominent in top 500 companies across the globe. With these features, it is essential to adopt cloud-based microservices where using APIs is necessary.
Hence, it seems like APIs are the bedrock that drives the interconnected fintech future. Now, let’s see the benefits of using Fintech APIs, and how they work.
What is the function of Fintech API- How does it work?
From the perspective of programming, APIs are the building blocks. You can insert them in the code like inserting functions and classes, and then they perform required functions or give certain outcomes.
When the end user requests to withdraw funds or a similar thing, that request is forwarded to a reliable third-party system with the use of an API.
Simultaneously, when the request-receiving system gets the request, it will process and authenticate the request and will send the data back to the application.
Here’s a simple example for understanding this process:
When you buy something from an eCommerce app, at the time of checkout, you provide your card details and click on the Pay button.
In the background process, the credit card data is sent to the payment processor using an API, and there the transaction is verified. The data is delivered back in the app. If the process is successful, the order is approved.
As one can see that the API keeps a clear description between the third party and the application. It also imposes strong security protocols which stop different parties from making vulnerable requests.
However, this does not mean that APIs are risk-free completely. Some hackers commonly send vulnerabilities in APIs. Hence, one should take care of API security for maintaining the cybersecurity of your app. As a result, your app should only be connected through APIs on which you rely or which come from reputable platforms.
Benefits of Fintech API
APIs are beneficial for both end users and app developers. Here are some of advantages that they provide us:
Lowers Development costs
APIs reduce the need for developers to build app features from the beginning. Hence, it cuts down the development hours significantly and helps the employer to save a certain dollar.
Speedier Time-to-Market
If there are no APIs, developers have to write the same code for every banking or Fintech app they develop. And they might have to do it even for third-party integrations. So, when you imagine the same, it would increase the development time.
But with Fintech APIs, developers can easily add APIs in the building blocks in the code of your software and refer to them easily. Ultimately it will make the time to market time shorter and quicker.
Maintaining Security while Data Exchange
The real beauty of API is that they do not reveal the code program functions of the systems. They limit what functions developers can use.
In the Fintech apps, data security is solid across the industry. And Fintech APIs are made in a way that matches these security standards. However, it is not possible to say that APIs are 100% safe and secure.
Hence, API developers should follow Fintech API development standards to develop the utmost secure APIs.
Better User Experience
Many times third-party integrations make users’ lives easier and hence improve the user experience.
APIs keep user data secure and speed up the development time. It means that APIs will allow users to enjoy better features and user experience. Also, the users get affordable fintech services with reduced development expenses.
These small interfaces also allow the owner to focus more on core business rather than spending time on development, security, and maintenance. Hence, all these benefits make the user experience better for the business owner, end users, and other people associated with that app or software.
Concluding Words
We hope the above information has helped you with an easy understanding of what Fintech API is, its benefits, and how it works. If you are keen to know more about Fintech APIs, comment your doubts in the comment section. We will get back with an accurate solution in no time. Happy reading!
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