by Spencer Nguyen • June 21, 2022
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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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:
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.
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.
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.
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.
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:
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.
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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