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APIs In Fintech – What Are The Benefits Of Using APIs? | Use cases in Fintech APIs
Digital Payment FinTech

APIs In Fintech – What Are The Benefits Of Using APIs? | Use cases in Fintech APIs

By Rajarshi August 25, 2022 - 38 views

What are fintech APIs? They are the building blocks of the fintech space. 

There are various types of APIs that enable different activities within the ecosystem. 

For instance, consider how your bank account funds can be automatically retrieved by your payment wallet. Or automatic credit card approvals while shopping at ecommerce portals. 

All such operations are enabled by APIs (application programming interfaces), which are bridges or connections between varying software programs, enabling better data exchange and interactions among them.

To put it simply, the relationship between APIs and fintech is deep-rooted. The former is the crucial code which enables communication between two software programs or applications. 

Open banking solutions have proliferated fintech APIs in applications, enabling on-the-move financial management and transactions without any bank interactions, courtesy of the development of fintech programs and apps galore.

How do APIs work?

Fintech APIs work in multifaceted ways. Whenever a user of an app/program submits any request like withdrawal of funds for instance, this is dispatched through the API to the third party. 

The system receiving this request will authenticate and process the same, before sending data back to the application. Suppose you are using an e-commerce application to purchase any product. While checking out, you enter your credit card details and then click on the payment option.

At the back-end, the card information is dispatched to the payment processor through an API for verification. The data again comes back to the app and the order is approved once it is successfully verified. 

The API ensures demarcation between the third parties and applications, while also adhering to security regulations which combat unauthorized requests.

Advantages of Fintech APIs

Some of the biggest advantages offered by APIs include the following:

Cost Benefits

APIs enable customization of customer experiences, saving costs for financial institutions and banks in the long haul, while also boosting their customer case. 

Customers can now personalize their financial solutions as per their requirements. Banks can also offer added services to their customers with APIs, including integration of accounts with programs/software that helps customers manage their money under a single umbrella.

Access to Data

Banks could earlier conceal their information from the general public. However, this made it doubly difficult for applications or users to get access to crucial data in various circumstances. 

APIs ensure the accessibility of vital financial information across third parties.

Faster Growth And Inclusion

Financial inclusion is only possible with widespread delineation and usage of fintech solutions. 

APIs are crucial towards achieving this objective, bringing more people into the realm of financial inclusion and convenient transactions. It has played a pivotal part in the growth of the industry.

Use Cases for Fintech APIs

Here are some compelling use cases for fintech APIs that deserve attention:

Processing Payments 

APIs for payment processing scale up overall payment options for all merchants. With shopping going digital with a vengeance, merchants will benefit from accepting multiple payment options. These APIs can also help in smoothening payment and checkout mechanisms for online shopping.

Peer-to-Peer Initiatives 

Fintech APIs are also playing a part in enabling applications that enable money exchange and other transactions, leading to lower expenditure for all parties. They are also helping in the peer-to-peer lending space, automating loan sanctions for applicants.

Managing Investments

Fintech-based API solutions are also ensuring better investment management. These APIs offer access to individual portfolio data, enabling brokers, advisors, and consultants to continually look out for the best interests of their clients, without having to garner information from multifarious sources.

Regulatory Mechanisms

Regtech, as it is known, indicates technology in the regulation space. These APIs help with anything from biometric verification and fingerprint scanning to other authentication systems.

Banking Operations

Banking APIs are making it easier to access more features on mobile and other devices. APIs are enabling remote fund transfers, deposits, loan applications, and a lot more. 

Banks are widening their service suites and presence with the help of APIs.

Blockchain and Crypto

Cryptocurrency is steadily gaining popularity worldwide. 

It uses blockchain technologies for the sharing and storage of transactional data. APIs are helping establish more benchmarks/parameters for blockchain-based communication, verifying transactions, approving transactions, verifying user credentials, and ensuring higher security at all times.

What The Future Looks Like

Fintech APIs have already gone mainstream, and the banking sector is on a generational shift towards implementing the same. 

API integrations will continue to be the order of the day, across more applications and software programs in the space.