By Ramki Gaddipati, Co-Founder and CTO, Zeta
Digital transformation is extremely crucial given the unprecedented times we are in. It is high time for banks to modernize their legacy business systems without causing any disruptions which is a major challenge. However, Application Programming Interfaces or APIs have evolved as the crucial enabler in conducting a hassle – and risk-free digital transformation. An API-led approach to system modernization will allow banks to collaborate with other fintech firms into adapting modern technologies while increasing safety and reduction in costs at the same time. API banking or open banking protects the integrity of the system by enabling secure and governed access. API banking refers to a set of protocols that enables banks to offer their services to other fintech companies through a tech interface between software programs or APIs.
Integrating API in various affairs of easing financial services
An API is a programming interface that allows you to sync and connect the database of service with any other existing application making it easier to track data in a safer way. The data tracking in Fintech has been proven beneficial in terms of addressing threat actors, customizing consumer needs, effective use of time and taking the fintech industry to newer heights. Amongst the different aspects of features that technology is offering, security is the primary concern. With API, the security features that banks and Fintech companies are building into financial solutions are becoming even more critical. As new technologies are coming into the market focused solely on consumer security, banking technologies are enhancing security to maintain a sense of trust with customers.
The open banking and API procedure will also broaden the horizon for financial companies to access customer data and features to provide them with accurate resolutions. Although it is a well-known fact that customers have an immense amount of faith in their banks in protecting their data. Whereas technology innovation must be carefully aligned with security procedures for banks to continue their role as a trusted advisor to their customers. The adoption of powerful programming interfaces such as APIs also helps in product sharing and innovate various partnerships opportunity to help customers reap the best of financial service.
APIs act as connectors between banks and fintechs so that both parties can benefit from each other and offer modern solutions to their customers. APIs are the proprietary offerings across the financial sector now, with multitudes of benefits that API holds, below are few key highlighted areas:
Security: It is essential for banks to ensure API security which is possible through collaborating with a strong and secure partner. A strong API technology partner will have the technology, knowledge of the regulatory environment and processes to ensure tight security. So it is extremely important for banks to choose the right API partner who has the right experience to provide a robust API solution with the confidence that risk is minimized and the surveillance is used to mitigate new risks as they arise.
Productization: In the progressively open financial services industry, an API is not just a back-end service provider, but a product which can monetize and set a foundation for other new services. APIs can also be provisioned quickly, often with minimal back-end refactoring required.
Collaboration: API solutions are nowadays proving to be the platform for collaboration between banks and fintech firms. For banks, API solutions can help older financial institutions find the right fintech partners to offer innovative solutions for their customers. For FinTechs, APIs can get these startups working more effectively with banks’ legacy systems instead of building new systems on their own.
Role of Artificial Intelligence and Machine Learning in API enabled banking
Infusing AI is another aspect of digital transformation. By using APIs, banks and other companies can introduce AI capabilities into their already existing apps without any help from data scientists or engineers with AI specialization. Artificial Intelligence (AI) and Machine Learning (ML) are complex and multifaceted programs. API is simply one of the major tools across these programs. It powerfully automates various programs by saving a lot of time and energy and by giving loads of new data streams.
Creating applications based on artificial intelligence technology is a time-consuming and complex process, but APIs make it simple and affordable thus making all the necessary security measures required in a bank accessible at a low cost. Although the choice of API for machine learning projects will depend on a specific industry. In a banking project, the use of API along with AI and ML is necessary to determine the security factors of the customers. Ensuring security with an open banking technology platform like API is never easy. It is mandatory to partner with prominent technology firms to secure financial transactions.
Conclusion
As more fintech firms are looking to engage with banks, APIs will play an important role in helping these upcoming startups to effectively engage with the bank’s legacy systems. As more fintechs emerge, the need for more banking focused APIs is poised to increase. The use of APIs for open banking is enabling various innovative ways towards a secure banking experience. The integration of APIs in open banking is one of the best options in the current situation. Adapting technological advancement in this era is the only way to stay ahead of competitors making it a trend across banks and fintechs towards integrating APIs.