Nowadays, when everything goes digital, how can banking and finance services be left behind?
Many banks have traditionally left their work and have been made digital. You can say that the digital transformation of banks has taken place. But have you ever thought about what is the role of APIs in the banks’ digital transformation?
Some people who are in the banking industry themselves may not even know about APIs. If you are also one of them, then your queries will be sorted. Here you will learn how APIs have been able to make the banking industries digital by turning them around and how it is beneficial.
How does the API function?
You may contemplate like an API is a rule or a kind of precise language or code that is used to connect to numerous applications. For instance, when you use different applications, you find that there are two to three buttons available in the interface, such as like, follow, etc. Now the two different applications can run together through APIs.
There are two types of each, one public and the other private. The difference between these two types of APIs is the same as their name is suggesting.
Private APIs are available only to those people who know about them, and those who have created them. These APIs have projected the use for internal systems only.
Public APIs are available online for everyone to use. You can also consider it as open APIs. These are considered as the master for revolution, as developers around the world can use these APIs, and by doing so, they can innovate something new out of it.
Banking through API
Many banks have opened a partial portion of their clients or their business information to third parties. The third-party can be anyone such as finance, insurance, loan companies, stockbrokers, etc. Now, these parties can connect and use their data through their APIs. They will strive to advertise their products that suit your requirements. Hence, this kind of banking system is considered ‘Open banking’.
How APIs are Revolutionary for our banking industries
Till now, the data related to our banking is stored in the core banking system. But, as many banks are adopting open banking systems, our data can also be with any third party. As mentioned earlier, the data can reach any home loan company as well, which means they will know your credibility through your CIBIL score. Next, they will promote their best possible plans that suit your requirements.
Similarly, if your banking data is shared with any finance or credit card provider company, they will check your data about your spending through credit cards and your payments reports as well. They will make their high-end products presented to you at an attractive cost. Not only these third parties, but the bank itself has far-reaching benefits of adopting an open banking system. Below are the same.
Efficient and speedy operations
The banks can aid their clients or customers in making seamless and speedy transactions through the API-based platform. APIs empower people to make banking transactions through their phone. They can use the services such as mobile banking, online payments, or wallets of various applications on their mobile phone. The transactions can be done within seconds, and the great part is that it is safe and secure. The customers won’t need to physically visit the bank for numerous transactions, which ultimately saves time for both banks and the customer himself.
With the help of API based banking systems, customers can personalize their services as well as packages. It integrates the customers’ data through the system. It not only optimizes the services of customers’ data but also helps to raise their loyalty.
By collaborating with e-commerce financial firms, and businesses along with customer engagement, a bank can expect a growth of around 20% in their revenue. Hence, APIs play a crucial role in generating and increasing the revenue of the banks.
The overall financial growth of a nation
APIs allow other than banking firms to use the customers’ data effectively. It helps other financial companies to enhance their business as well. It ultimately helps numerous companies and service providers to generate leads and earn a profit. When all the financial companies or insurance companies grow, the financial health of the nation also improves.
Around 90% of banking transactions take place through online systems, which has shown a significant improvement in financial health. APIs have a major role in the growth of the bank as well as in the nation. It has made people save their time as well as money. It has eased the process of transferring money from one person to another. Open banking is also considered a boon to the nation. As APIs have brought a digital revolution in the banking industry, one can safely conclude that APIs are the key enablers of digital transformation regardless of the domain.