The banking and finance industry has drastically morphed in recent years. The major driving factors have been the rise of Fintech companies and the use of Application Programming Interfaces ( Fintech API). Because of APIs and Fintech, people can now do incredible things with their money from the comfort of their homes that once required them to visit a local bank or brokerage.
The use of APIs for Fintech has been made possible in part by the rise of open banking. Banks now have customers’ permission to provide third-party providers with access to their financial information, allowing for the development of apps and programs that make everyone’s financial lives more manageable.
Consumers can make the payment on their favorite E-commerce site via a payment gateway on the go. Also, with third-party authentication software’s Digital, KYC gets completed in no time. One can swiftly invest in Mutual Funds, stocks via API interfaces, or Application Programming interfaces from their bank-of-choice. Fintech companies are sanctioning loans to their consumers within five mins post-checking the credit score in real-time.
The benefits go on from booking flight tickets to using smart devices for day-to-day needs or using Facebook and Google interfaces to sign into the websites. The above examples show that API plays different roles in our daily walk of life behind the scene. API is fast, secure, reliable, and efficient and helps eliminate barriers to achieving the organizations’ desired goals. This blog covers everything about Fintech API and how Fintech organizations can use them for their benefit.
What is an API?
API or Application Programming Interface acts as a digital interface to allow communications between two systems. According to Deloitte, more than 22% of banks have already deployed their API platforms, while another 39% are currently working on deployments, with more expected to enter the sector in 2021.
A very prominent instance of API is when people log in through their Google or Facebook accounts. To better understand the concept of API in Fintech, we can give you an example of online shopping. With the rising demand for online shopping, merchants around the world are thriving for seamless payment experiences. Fintech API has access to data among different parties in financial transactions, including banks, websites, third-party providers, and consumers.
Another major concept of API that is on the rise in Open API. These apis allow third-party service providers to access your organization’s data in a controlled yet streamlined environment. It can help create multiple new opportunities and add more unique functionalities to your services. Let’s now move to how your Fintech organization can use these APIs to grow even further.
How can Fintech organizations use API?
Some of the major sectors wherein Fintech API is used are Asset and Wealth Management, Consumer Lending, Retirement Services, Investment and Banking, Risk management, and much more. These applications of Fintech serve for even further growth of the industry.
The process of using an API is mentioned here:
- Fintech pays a fee to access the BaaS platform
- Financial institution acting as Baas provider opens API to Fintech
- Fintech uses API to build new financial services solutions
Let’s move to some use cases of Fintech API in the organization.
1. Smart Contracts:
The first example that we want to highlight here is the use of smart contracts. The decentralized applications address a change in layout, where applications are executed through a P2P network through smart contracts. For instance, a hotel room card reader may connect with an API to identify and ensure the customer’s credentials and initiate effective room access. The data would self-execute an API call to finish the authoritatively agreed payment.
2. Time-Saving and more:
API enables Fintech companies to quickly respond to market changes and connect to the different functionality their clients need. All this takes less time than standard tools because API joins other systems and access data outside the company. New services are quickly tested and released into production, and as the number of services increases, the system can be easily scaled up.
3. Safety and Security:
When FinTech software is developed and designed, you get better safety and security features integrated into your software product. This will help you function as a FinTech company and manage people’s finances well pretty easily and efficiently.
This means less headache of managing any situations that can come up, which would not impact your business negatively. Hence it would help if you go for custom FinTech software development by outsourcing your requirements.
4. API enhances cost-effectiveness:
Agreed that initial investment for developing FinTech apps or related software from scratch will certainly prove expensive, but it pays off. You are most likely to get maximum returns in the long term. It ensures a smooth and streamlined flow for your business and ensures that you do not have any hiccups in following processes efficiently.
5. API has future-proofed Fintech
When it comes to adding features/new functionalities to a banking software/Fintech application, this can be a daunting and resource-extensive task. As the already produced application is created and delivered, you cannot undo it. This approach, in comparison with custom-developed FinTech software, is a little outdated. With custom software development, you can add features later on if your process needs them.
Because the software is tailor-made to easily and efficiently fit your business process, you can get this done and add features that you later need by contacting the software development company/ partner.
6. Real-time Banking:
API allows automating processes for regular and perpetual tasks, saving you time and effort. Such a real-time tool converts data in real-time so that the business makes better client service decisions.
A critical part of making effective games (in your Fintech applications) is the process of ensuring winners get rewards and quickly. Dependence on net banking and manual techniques were not ideal for progressive gaming organizations. Razorpay has assisted gaming organizations Mobile Premier League, RummyCulture, Pokersaints, and many others to transfer rewards promptly and easily.
Furthermore, banks can maintain their competitive advantage through :
- With the use of API, banks automate credit risk profiling which reduces the level of manual research needed, consequently decreasing the onboarding lead time for the customer.
- Enhanced data access via open banking improves the quality and speed data can be accessed and processed to support credit decision-making.
- a plug-and-play platform that enables combined identity and fraud checks via flexible API, allowing a seamless experience that keeps the customer in the journey while utilizing multiple sources to verify identity and complete fraud checks;
Challenges in Fintech API:
- Rapidly launched APIs are limited in function.
- Customer or partner concerns related to privacy and security
- Legacy banking systems that aren’t optimal for API integration
How can Copper Mobile help you?
If you’re looking out to experience the future of API-powered Fintech or API-powered banking, you must get in touch with our trusted mobile app development experts. We provide innovative solutions to customers (banking and fintech institutions) for their biggest challenges. We have dealt with multiple collaborations between banks and Fintech organizations to bring new functionalities to the market, enhance existing services, and simplify the end user’s journey.