APIs in the Fintech Industry: What You Need To Know  | Dreamfactory

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Man using APIs in the fintech industry.

Fintech is the perfect example of how emerging, disruptive technologies are rocking a traditional industry: the banking sector. Fintech, a portmanteau of financial technology, is its own industry, changing the banking world and forcing it to evolve. Most financial institutions are now using some kind of fintech, from simple banking apps to entire platforms aimed at promoting open banking. APIs in the fintech industry allow disparate systems and organizations to talk to each other safely and securely — an absolute must when dealing with users’ financial and personal information.

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APIs and Open Banking

Fintech dates back to the 1860s, with an innovation surprisingly similar to the APIs the fintech industry uses today. Giovanni Caselli was the developer of the pantelegraph, a telegraph system used for verifying the signatures attached to financial transactions. Back then, it took nearly two minutes to transmit a single piece of paper carrying only 25 words. Today, APIs or application programming interfaces work almost instantly, to help verify transactions, connect users to their banks, and more recently, connect financial providers to each other. This is the core tenet of open banking, a concept encouraging open bank data or the sharing of resources and information to create a more fluid and organic experience for bank users.

The primary use for APIs in the fintech industry in this way is to provide third-party companies, such as fintech startups, with easy access to more traditional banking systems. For example, when someone wants to switch bank accounts, they might not necessarily have to contact both banks and go through the sometimes arduous process themselves. A third-party app or online service would use fintech APIs to connect, with the customer’s permission, to the financial data in the current bank and switch it all to the new bank in a much more stress-free transaction.

Another example is an app that might help someone figure out how much credit they could successfully apply for. These apps could take advantage of a range of APIs in the fintech industry from banks, mortgage providers, loan providers, and credit card providers to give the user a wealth of information before they make any financial commitments.

Open banking also empowers business banking users to connect a variety of accounting services directly with their financial providers. Use cases include monitoring financial transactions on customer accounts and helping protect against fraud. DreamFactory is ideal for situations like this where APIs are required to bring a variety of systems together in a unified fashion. It empowers enterprises to bring all their data into a single destination, including information held in CRMs like Salesforce.

Using APIs in the Fintech Industry Increases Productivity

There are nearly 6,000 startup fintech companies in the Americas, and that number is increasing all the time. Digital transformation has been driven, in part, by the recent pandemic situation, with businesses in every industry realizing they need to have robust online offerings to deal with the challenges of an ever-more volatile global landscape.

With the fintech market becoming more crowded, startups need to look for an edge wherever they can. APIs can help young companies get their products to market faster, increasing productivity, creativity, and innovation. This is because so many banking APIs already exist with the functionality required to make at least a part of a new venture come to life, fast. With services like DreamFactory, you can create and deploy an API in a matter of minutes, linking quickly to services and information that’s relevant to your users.

API Use Could Reduce Development Costs

Anyone who works in the financial industry will have their eye on costs, and fintech companies are no exception. Online banking services of all types provide real-time savings for users by cutting out the need for trips to the bank or even phone calls. Developers can also reduce their costs by taking advantage of pre-built APIs, especially those provided by a range of financial institutions. Creating your own API is also possible with code-savvy developers or a partner like DreamFactory, and it's more cost-effective than you might think. It’s worth remembering that once you’ve created an API, that API can be used again and again with no repeat cost.

APIs in the Fintech Industry Improve Customer Experience

One of the primary reasons to use APIs in the fintech industry is to create a more user-friendly ecosystem for all users. The financial sector is traditionally wrapped in red tape. Paper forms, multiple signatures, and even the faxing of documents are all massively time-consuming tasks and hardly sustainable in terms of their eco-friendliness. Third-party providers of financial services have the opportunity to cut right through that bureaucracy and, using APIs that seamlessly connect customers to the information they need and vice versa, vastly improve the overall attitude toward banking.

Improve Communication and Effective Partnerships

APIs in the fintech industry that help partners connect with each other and the information pertinent to transactions can’t help but improve business relationships. Having easy, quick access to a particular system or being able to create an app that connects businesses to their buyers or suppliers means there is less chance for misunderstandings, and a much clearer paper trail — except it’s paperless and therefore better for everyone. E-commerce providers can liaise with their third-party logistics partners with ease, discussing the amounts sent back via refunds or the costs of warehousing solutions for the following year. Businesses can offer PayPal or credit card payment methods to customers via a range of gateways and the use of APIs. They can also provide buyers with the option to browse a range of marketplaces, where they can search for new products or services, yet still connect directly back to the original seller via a single app or website.

Access to open APIs improves the partnerships between businesses, makes payment processing and other business transactions easier, and effortlessly improves the overall user experience for all parties.

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DreamFactory for APIs in the Fintech Industry

Whether you’re creating an app for helping users find personal finance options or trying to help businesses manage their customer data, DreamFactory can help with any aspect of using APIs in the fintech industry from creation to deployment.

Try DreamFactory today and discover how simple it can be to connect to a whole world of services via financial APIs.

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