Application programming interfaces (APIs) have revolutionized the way businesses connect with their customers, and banks are no exception.
Banks are using APIs to improve their in-house operations and to give their customers a better, more efficient banking experience.
Banks use APIs to solve a number of problems. For example, a bank that is struggling with large numbers of failed payments -- or non-compliant payments -- can use APIs to tweak their processes for better results.
Banks use APIs to enhance or streamline activities such as:
- Account authentication
- Payment processing
APIs also improve the consumer experience, helping customers to make payments and keep track of their finances. Banks might also use APIs to develop applications that are loaded with consumer-friendly tools, such as a location finder that can help a customer on the go to quickly find the nearest ATM.
APIs also give banks insights into customer behavior that help them to suggest products – such as credit cards and savings accounts – that match an individual’s spending behavior.
Some banks use private APIs that are used strictly within the company to improve internal operations. Others use partner APIs that only specific third-party partners can use. Finally, banks can use open APIs that can be used by anyone.
APIs also are a key part of banking-as-a-service (BaaS), a major part of open banking that connects fintech companies and other third parties directly to a bank's system.