API in banking: Types and benefits
While some hail API and all the trouble it entails, it is commonly agreed that its effectiveness is groundbreaking. To start with, let’s debunk the myths around the big bad wolf stealing users’ private data and spying on the innocent ones.
What is API?
In fintech and banking, API is used as a method of communication between third parties and online banking systems. For instance, an independent payment or financial service provider can access certain data about a certain user through his or her bank account by relying on the already undergone KYC process. However, unlike the critics argue, a banking API can be granted access to customers’ data only after full consent is given.
The need for speed
The main benefit of API, in the age where time is money, is the elimination of redundant procedures, meaning that third parties don’t have to verify new customers but solely rely on the KYC procedure already completed by the bank. In other words, it ensures speed and ease of use for third party financial service providers. The only element needed is a successful online banking login. An example is credit scoring, which can be submitted in seconds because of the data imported from a client’s bank account by the API.
Because of their benefits (and ensured security), APIs are being used in a number of solutions, and fintech is pioneering their implementation. Last year alone, LetsTalkPayments.com has counted a total of 63 useful APIs from fintech startups from 12 different segments “to supercharge your product”.
Different types of APIs come with different target solutions and usages, but as outlined by Fintech Ranking, these are divided in:
- Core banking (for deposits, lending and SME cross-border);
- Plug & Play (trading, accounting routine, oAuth)
- Cards, wallets and transfers (SDK stock, MultiCurrency, fraud monitoring and others);
- Acquiring (mobile and alternative phone payments, NFC solution, online card acquiring and others).
Interested to find out more? Why not get in touch with our team?