Consumer expectations for tailored experiences have risen due to technological advancements. We are witnessing Digital Darwinism, in which customer needs are rapidly developing, and consumers are demanding more and better experiences. Keeping up with these demands is more difficult than ever, and financial institutions are racing to meet them.
The COVID-19 outbreak, on the other hand, accelerated the adoption of digital models. Retail, manufacturing, finance, and hospitality are just a few industries that have transitioned from traditional to digital business practices. APIs aided in this transition by making networking and collaboration more convenient.
APIs are a particularly effective solution to a problem that has recently arisen for banks. For the uninitiated, API, or ‘application programming interface’, allows a bank's systems to communicate with another efficiently, ensuring that customers receive up-to-date information and support regardless of where or when they interact with the bank.
While private and partner APIs have existed for some time, open APIs are the most recent innovation, allowing businesses to integrate third-party services by onboarding already accessible APIs, providing consumers with ease and convenience across multiple touchpoints.
APIs: Preparing banks for the future
The power of APIs to give new ways of communicating with suppliers, consumers, transactions, and data is game-changing. Financial firms that do not invest in APIs now will fall behind their competitors. We currently live in an ‘API society’, with banks only recently joining in. Despite the fact that API technology is not new, customer growth, market disruption, and regulatory change indicate that the banking industry is contemplating and planning for an API revolution.
Enhancing overall customer experience and engagement
APIs can be employed to improve overall customer engagement and respond to customer requests in a secure, agile, and future-proof manner. Historically, the traditional banking industry has been slow to adopt new technologies. By introducing APIs to financial services startups, traditional banks can retain existing customers by offering innovative services. Further enabling banks to appeal to potential clients seeking high-tech services.
Access to customer data
Most banks enable third-party platforms to access data and execute banking operations because they have limited and secure access to their core banking system. Transactions, account information verification, balance enquiries, and other actions fall within this category. APIs make the bank more appealing to customers by allowing them to engage with financial data in more sophisticated ways. By increasing brand loyalty and adhesiveness, it can improve customer engagement and satisfaction.
Reduce expenses
Banks with open APIs can also avoid developing costly in-house technological platforms by effectively outsourcing the work to experienced and cost-effective fintech firms.
Open API provides financial solutions
APIs play a critical role in Open Banking projects that should not be overlooked. In the new Open Banking ecosystem, APIs are a business channel. API adoption and utilisation can help banks expand and improve their services and offerings. These APIs, on the other hand, have the potential to alter the banking industry by allowing fintech companies to use the data to improve their products.
Takeaway
Consumers are increasingly expecting newer technologies to interface natively with legacy systems. Replacing these systems is expensive and time-consuming, and many institutions are afraid to even touch them. Open APIs serve as a dependable translator between legacy and modern systems, allowing them to communicate smoothly. This creates a link between old and new, increasing the useful life of existing systems without the need to change legacy code and risk errors. After all, the future is integration. APIs also give you the edge over the over-exhausted competitive banking sector by providing innovative solutions and enhanced services. One can easily outsource API development, integration and maintenance services to experienced fintech firms for the best-suited outcome.
(Milan Ganatra is Founder and CEO, 1Silverbullet--Mumbai-based fintech startup)
