Over the last few years, the way banks function has changed drastically. The digital revolution in the financial industry is here and banks have to modernize themselves to stay competitive, irrespective of size. In addition to this, customers today expect more from their banks and are more digitally savvy. They prefer interacting with banks and financial services online, provided security is given. Furthermore, they also expect banks to provide them with a range of non-traditional services.
Here is where the Open Banking model comes in handy. It is designed to help banks meet the changing demands of their customers and have additional monetization avenues. To put it simply, an API (Application Programming Interface) is an interface that allows for easy synchronization, linking, and connection between the database of the service with any application. Such a powerful technology ensures seamless interaction between systems, apps, mobile devices, and applications. APIs for online banking is advantageous to both the customer and the bank – and this is why more and more financial institutions are implementing the same. According to Juniper Research, the number of open banking users is expected to reach 40 million users by 2021.
API integration is already being used by a plethora of institutions worldwide, including private services such as PayPal, wherein it integrated API with Siri. and Facebook, where the platform integrated APIs of PayPal, Visa, MasterCard, American Express, and others. Some applications in need of integration include payments and settlement services, deposits and lending, trading and insurance, digital currencies, and so on.
With this as our base, let’s discuss why banks need API integration to expedite growth:
- Survival: Technology is ever-changing and banks need to reinvent themselves to sustain – this means partnering with third-party apps and products and open banking. It has also become easy for customers to access the products and services of financial enterprises on third-party applications and websites. Banks need to open up APIs and capitalize on such distribution channels for survival.
- Simplified processes: API platforms simplify difficult steps and allow data to flow easily between different platforms. When this happens, banks need not worry about time-consuming integrations as the complex procedures will be handled by software providers. This will accelerate innovation, save a lot of time and energy, and provide a seamless experience.
- Convenient and secure: When critical financial data is shared between different parties online, there is a need for data privacy and enhanced security measures. APIs can be developed to ensure convenience along with utmost security. A great thing is that custom APIs can be created by developers that offer secure environments.
- Aids start-ups: In India, when it comes to the fintech industry, the action when it comes to start-ups is high. This is due to the evolving customer behavior and the popularity of financial services and products online. Start-ups can create innovative products and services and improve their existing products with the help of APIs.
- Provides benefits: Through API integration, financial institutions can create functional digital services within days, lower their costs, speed up their implementation processes, connect applications to mobile and cloud solutions, give customers an improved experience, and so on.
The way forward:
The future of digital banking is now. Banks need to use and develop APIs if they want to grow their business and make processes easier for customers. APIs have been implemented by a plethora of financial institutions and it has been hugely beneficial for them. For a successful digital banking transformation, the government, banks, and businesses should function hand-in-hand. Building sustainable financial ecosystems with the aid of technological advancements is the need of the hour for our banking systems.