Pairing APIs and Finance: How Banks Use APIs

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Application programming interfaces (APIs) do a lot of behind-the-scenes work that you might never notice. When you look at the weather forecast on your smartphone, you get updated info because of an API. You rely on APIs when you sign into your email account, get driving directions, and book airplane tickets. Learn more below about how banks use APIs, and how APIs and finance work together in the industry.

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What are the benefits of joining APIs and finance software?

APIs and finance perform a broad range of services that do everything from improving customer experiences to reviewing financial data before processing a loan application.

Banking APIs have some obvious benefits, such as:

  • Driving customer engagement through websites and apps.
  • Tighter security for financial information.
  • Using open banking to improve efficiency (The European Banking Authority currently requires this for its member countries).

DreamFactory can help you expose API endpoints while following strict security standards. You can see how DreamFactory protects account information and other data by starting a free trial.

The benefits of updating the way banks use APIs don’t end there, though.

Better operational efficiency

APIs and finance can contribute to the operational efficiency of the banking industry and businesses that rely on the banking system. For example, a credit card API could make it easier for service providers to confirm account information and process payments.

Additionally, a company with complex accounting could use APIs to connect software that provides cost-effective ways to settle accounts and gain insight into client behaviors. By using an API to link a company’s software to its banking platform, you help create a streamlined system that can identify inaccuracies.

Increase customer-oriented services through open banking

An open banking API lets financial institutions share information safely with third parties, such as fintech companies, mobile app startups, and loan brokers. Open APIs don’t mean that financial institutions give everyone equal access to data. A financial institution can still control who uses open APIs. DreamFactory provides a dashboard that lets you manage user privileges easily.

Secured connectivity can lead to improved banking services for clients. By exposing some customer data, you can help developers build applications with features that help them access their bank accounts, take advantage of new products, and see their account information in real-time.

The digital transformation process might seem scary, but it can give your clients access to mobile banking, banking apps, digital financial products, and microservices that give them more control over their money.

More collaboration between businesses

Traditional banks can only offer a limited number of services. You need collaboration to future-proof your position in the financial services industry. APIs and finance technology create more opportunities for collaboration.

Changing how banks use APIs with third-party partners could revolutionize customer services. Traditional financial institutions need the services that third-party providers can create. For instance, the embedded finance strategy combines financial institutions and smaller companies willing to build unique products and take bigger risks.

PSD2 (Payment Services Directive) already encourages open API and finance software to connect and build a competitive market based on serving consumers and minimizing security risks. By giving more choices to consumers, individuals can decide which products serve them well. Over time, APIs and finance products will reveal which options people prefer.

How do APIs and finance software work together?

For the most part, APIs and finance software work just like APIs and other types of software. A third-party application or microservice sends a request to the API. The API passes the request to the financial institution’s database. If approved, the bank sends the requested information to the API, which then hands it to the third-party app.

How banks use APIs can alter the process somewhat, but that’s the basic way they function.

Anyone who works with financial data will wonder how APIs prevent unauthorized users from accessing private information. When it comes to APIs and finance services, you cannot pay too much attention to security.

Some of the most effective ways to secure information include:

  • Encrypting data to make it unreadable as it passes through the API to the user.
  • Restricting API access to authorized users.
  • Giving users the lowest level of access needed to perform a task.
  • Using OAuth so approved users can access data without revealing their identities.
  • Limiting the number of requests users can make during a specific time.
  • Moving all traffic through an API Gateway.

DreamFactory supports all of these security measures, so you can use the cloud-based platform to share data without losing control. The tool makes it easier than ever to open how banks use APIs with other institutions.

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Generate a full-featured,documented, and secure REST API in minutes.

Sign up for our free 14 day hosted trial to learn how.

Create APIs instantly with DreamFactory

The way banks use APIs will influence the future of financial services and products, so it makes sense for institutions to explore tools that help them open their API endpoints without putting data security at risk.

DreamFactory lets you create APIs instantly so you can combine databases, open your data to approved partners, and access services from anywhere with an internet connection. It takes a low-code approach that doesn’t require any expertise.

Discover how much easier it is to combine APIs and finance technology by starting a free trial with DreamFactory.

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