Driven by the pandemic and the resulting shift to remote working, businesses are digitizing their financial operations as fast as they can. In doing so, their banking partners are increasingly expected to help them through the process.
Financial institutions (FIs) must meet this demand or risk losing business, and the easiest way to do this is through application programming interfaces (APIs). These can serve as a fast and reliable solution, enabling seamless and secure connectivity to a range of banking services while minimizing cumbersome behind-the-scenes tasks.
“APIs are the thing before the thing”, FISPAN Co-founder and CEO Clayton Spillway told PYMNTS in an interview. âThey provide a very easy way for a person or a system to interact with another service, so that person doesn’t even have to understand how the service works. “
Think of an API as a bridge between two different computer systems. In the case of banking, an API can be used to relay instructions from a person sitting at a computer using billing software to initiate a payment by simply filling in a few fields, such as the account number. of the recipient. The API will take that request, send it to the bank, and make sure it’s processed – and it’s all done behind the scenes.
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The simplicity of APIs is something anyone can appreciate, Weir said, noting how common they have become. If, for example, someone creates an account on a new website and the site sends an SMS to authenticate that new user, an API is at work.
âIt can happen because a company like Twilio has integrated this ability to send text messages to phones, instantly and at a very low cost, into a single API,â Weir said. âSo now every app developer in the world can take that bit of functionality and use it to improve their products. “
Weir said APIs hold the key to digital transformation at a time when businesses are overwhelmed by all the disconnected systems and services that the pandemic has forced them to adopt. One of the goals of digitization is to connect these systems seamlessly. But if anything, we’re probably further away than ever before as the universe of apps has grown dramatically over the past couple of years.
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Given these realities, it makes perfect sense for banks to make their services available through APIs, as developers powering this rapidly expanding universe of applications will have an easy way to access and integrate financial capabilities.
âIf banks can make what they do available through APIs, developers can create better experiences with more depth on top of these functions,â Weir said. “It’s the kind of power [they have]. “
However, APIs are not limited to providing simple and transparent connectivity. They are also inherently safer than local solutions.
Weir said API security is based on two main ideas: authentication and authorization. On the authentication side, it is a matter of verifying that the user of an application or a service is indeed who he claims to be. Meanwhile, authorization is more nuanced, controlling the permissions of each authenticated user.
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The average user of a banking app or digital wallet will only be able to see their own accounts, for example. But an employee of the company will be able to see everyone’s accounts if they have the right authorization. An API allows this access quickly and easily. As Weir pointed out, this capability is particularly useful in scenarios where a bank might need to share confidential data with third parties, something that banks in general have traditionally been wary of.
âAPIs have some really cool features,â Weir said. âNot only do they make sure that you are authorized to use the app, but they also allow variably restricting the actions that different parties or users can perform using this API, based on who they are. They are very secure, very authorized.