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Today’s post, “APIs Are Driving FinTech Innovation,” is sponsored by Misys, a leader in the area of financial software.
APIs are driving FinTech innovation
APIs are the backbone of modern communication methods; and the infrastructure used by developers to create user-friendly applications for smartphones, tablets, laptops and websites that access and link different content and services.
Are APIs the future?
APIs or Application Programming Interfaces aren’t necessarily a new concept as they have been used for some time to interconnect system components across varying sectors. However, previously most companies, such as banks or financial institutions would use closed API’s that were only available to add benefits to certain users. This served a purpose at the time, however the current climate has forced them to re-evaluate the use of API’s to ensure they are more flexible, adaptable and resourceful. The modern consumer now wants a service with APIs that provides access to all the data they need in one easy application, which has resulted in open APIs and API sharing, making services publicly available to anyone who wants to use them.
In the context of financial services, open APIs are allowing financial providers to give users public access to a wider range of data and create a better user experience in the process. For many, APIs are being tipped as game changers and will mould the future for financial software and financial services, working to drive innovation in FinTech companies as they strive to create new, customer-centric services and products.
An emerging economy
This wave of open APIs has created a whole new API Economy that wouldn’t be possible without the wave of open APIs and API sharing. Much of the emergence of the API Economy has been brought about by consumer apps across FinTech, availability of data from government and regulatory bodies, as well as independent companies and better cloud services, to name but a few.
And interestingly the finance and payment sectors currently have the highest number of APIs currently available in the market, which span across a wide range of different services. The main service sectors using finance APIs include payment gateways and processing; authentication and verification; payment acceptance; investing and lending; remittance; accounting and Bitcoin.
As a result, it is now becoming common practice for FinTech companies to use third party cloud-based services to host their services, which enables them to give users swift and simple access to relevant data as if it was being accessed from an on-site database, rather than a virtual cloud. This has meant that by collaborating with other FinTech partners and embracing new financial software capabilities for APIs means that FinTech companies are driving much more innovation. By combining concepts with open APIs across FinTech software, these companies are transforming the way users interact with their financial services. This results in a more user-focused product or service that adds greater value to the end user; and makes interconnecting different financial services seamless.
In turn, this collaborative approach amongst FinTech companies and banking institutions also fuels increased creativity and innovation with the products they develop, which will only work to grow the API Economy further and revolutionise the industry, while also improving the customer’s experience.
The power of payment processes
Some of the cornerstones of API development are related to payment processes, allowing users to pay for a wide range of goods via smartphones. Traditionally if you were using a certain debit or credit card to make a purchase online from your phone for example, you would be required to input your card details, then wait for the merchant to contact your bank to authenticate the payment, which would then be processed in a number of hours, sometimes even days.
However, the latest innovations in FinTech API’s mean that all this information relating to payment processes are now readily available through shared APIs. MasterCard for instance, offer a number of APIs that allow users a variety of choices for payment, money transfers and e-commerce all geared towards making transactions as easy, secure and transparent as possible. While UK start-up GoCardless has created an API infrastructure that allow small businesses to set up their own direct debit payment system. This means they can receive direct debit payments without the need to pay credit card fees or set up a merchant account.
With a wide number of open APIs already currently available and in use by FinTechs and some banks, we are now entering an exciting period in financial advancement. With open APIs, FinTech companies should be better positioned to adapt to the ever-changing demands of consumers and no doubt change the financial sector landscape forever.
Readers, how have the latest FinTech trends impacted you?
Finance Solver says
October 31, 2016 at 10:29 PMIt’s really interesting to see the FinTech industry changing the banking industry. The banking industry has been around for a good number of time and it hasn’t taken a long amount of time before FinTech companies are disrupting what was once a stagnant industry. I’m sure the consumers will benefit greatly!
Hero says
November 1, 2016 at 7:53 AMI couldn’t agree more, FS! It’s fun for finance enthusiasts like us to observe the changes over time.