With the advent of the internet and the increasing popularity of online banking, banks have had to adapt to provide customers with secure and efficient online services. In recent years, the banking industry has seen a major shift in the way that consumers interact with their banks. Banks are becoming digital-first, branchless, mobile and 24*7 active. These shifts This shift has been driven by the growth and prevalence of APIs, which allow banks to create a more seamless and efficient customer experience.
APIs, or Application Programming Interfaces, are pieces of code that allow two different software applications to communicate with each other.
In the banking industry, this communication is typically between the customer’s banking app and the bank’s back-end systems. For enabling commerce, APIs earlier were used to securely transfer data between banks and merchant payment processors for online payment processing. Today, APIs have been used to securely link bank accounts to third-party financial services, such as budgeting and investment apps. Banks are now also using APIs to improve customer service and experience by integrating with customer relationship management (CRM) systems and providing customers with a more customized banking experience.
By using APIs, banks can create a more intuitive, streamlined customer experience that allows customers to access their accounts, transfer money, and manage their finances with ease. In a nutshell, APIs provide enabling banks with 3 key features:
Interoperability
One of the most common ways that banks are using APIs is to enable customers to access their accounts from anywhere. By using APIs, customers can securely log in to their accounts from their laptops, phones, or tablets, and view and manage their accounts. This makes it easier for customers to access their accounts no matter where they are, enabling them to monitor their finances and make timely payments.
Security
Another way that banks are using APIs is to make money transfers simpler and more secure. APIs allow banks to securely connect customers’ accounts to those of other banks, allowing customers to transfer money quickly and securely between accounts at different banks. This not only makes it easier for customers to transfer money, but it also helps to reduce the risk of fraud and other security issues.
Personalization
Finally, banks are using APIs to offer customers more personalized services. By using APIs, banks can access customer data and use it to offer personalized services, such as tailored financial advice or tailored product recommendations. This not only helps to improve customer satisfaction, but it also helps banks to better understand their customers and improve their services.
Overall, the use of APIs in modern banking is helping to create a more seamless and efficient customer experience and improve customer satisfaction.
There are multiple types of API integrations that together enable such a seamless experience for the consumer.
- Payment APIs: Payment APIs are one of the most popular uses of APIs in eCommerce and banking. Payment APIs allow customers to make payments from any device to any merchant. Payment APIs are widely used in eCommerce and banking to provide customers with a secure, and efficient way to make payments and transfer funds. Payment APIs are also used to enable companies to accept payments from customers in multiple currencies and payment methods, without having to develop their own payment systems.
- Identity Verification APIs: Identity verification APIs are widely used by banking and finance apps to ensure that customers are who they say they are. This type of API helps to protect companies from fraud and identity theft. Identity verification APIs are used to verify the identity of customers by gathering information such as name, address, and other personal information.
- Risk Management APIs: Risk management APIs are used by banks and other financial institutions to help protect them from fraud and other issues. Risk management APIs are used to monitor customer transactions and detect any suspicious activity. They can also be used to analyse customer behavior and identify potential risk factors. Risk management APIs can also be used to help banks detect and prevent money laundering and other financial crimes.
Together these APIs help create a highly efficient ecosystem that enables a well-integrated embedded payments experience. The ability to buy products or services, verify the consumer and make online payments without switching apps and to be able to create a seamless customer experience has been a boon for players across industries and a massive enabler of digital commerce and improve customer retention for businesses. For individual customer, the assurance of secure payments and faster transaction has been a driving factor towards this shift. A combination of APIs for payment, identification, risk verification within the environment of a single app has enabled consumers and businesses to complete the entire journey through a single interface.
The banking industry is in a period of dramatic change, with the advent of new technologies, new customer expectations and a more competitive landscape. In order to keep up with up with new mandates like open banking, where customers can share their financial data with third-party providers, use of technologies like blockchain, and shift towards more automated agile form of customer journeys, banks must continue to innovate and adopt new technologies in order to stay relevant and keep up with customer needs and APIs was just the beginning of that change.
