Few things have shaken up the banking industry, the way API Banking has. According to the recent World Retail Banking report, close to 79% of businesses leverage API Banking to offer an enhanced customer experience.
In fact, most of the tech giants like Uber, Amazon, Airbnb, etc., have weaved APIs into their system, to smoothen and simplify customer transactions, refunds, and salary payouts to employees. So much so that API Banking has killed the wait time that goes into building products from scratch. Now it is just a matter of plugging in and getting started right away.
Let’s dive in a little deeper now.
How does API Banking work?
API Banking is fairly simple and can be explained in a three-step process. Let’s pick an example.
Say you recently started out Piggy, an online food ordering and delivery platform. And you are looking to create savings accounts for your employees. Now you want this done quick and hassle-free, so you approach an API Banking provider like Open. And having already integrated with the bank’s APIs, Open gets the job done in no time.
Here’s a detailed run-through of what goes around:
Step 1: Open integrates with the bank’s APIs and initiates a request to create savings accounts for Piggy’s employees.
Step 2: Bank goes ahead and creates these accounts and sends the information back to Open
Step 3: Open then passes on this account information back to Piggy. That way you can use it to transfer money to your employees.
Why not link directly with the bank?
Now there is one other obvious way to go about this – you (Piggy in this case) could go integrate a bank directly. But if you ask most businesses that have gone down that path, they’d tell you that it’s quite a tough task at hand. Here are a couple of reasons:
(1) Complex to integrate
Bank APIs are written with Simple Object Access Protocol (SOAP). It will eventually get complex when you start building programs to integrate with banks with SOAP technology.
(2) Strenuous error management
There could be instances where banks throw a technical error, and businesses like you wouldn’t be able to make anything out of it. API Banking providers will rephrase these technical error messages to simpler ones that are easier to understand.
(3) No standard API documentation
Banks lack proper API documentation. Most of them have it in a very hard-to-consume format which makes it difficult for businesses. API Banking providers, on the other hand, test these and then document it in a better way on developer portals. This way you can breeze your way through the API documentation.
(4) Tough time tracking payments
Imagine getting bombarded with bank statements of different formats from different accounts. Reconciling them automatically will make it easier for you to take action. However, this isn’t the case with the banks. At the end of the day, you will still have to sit through multiple reports to reconcile payments manually, which can be quite a tedious task.
(5) Difficult to manage multiple accounts
Most businesses use multiple bank accounts to go about their daily finances. However, it is difficult to directly integrate the APIs of these banks as most of them vary in structure. Therefore, it’s best to leave such hassles to API Banking providers like Open. That way you get more time to focus on what you do best – running your business.
Unlock new chances with API Banking
Apart from the ones mentioned earlier, API Banking also provides a range of services like:
(1) Issue cards
API Banking providers can help you issue and service white-labelled cards for business and individual accounts. You can even issue customizable virtual cards with dynamic spending limits.
(2) Customizable Loans
You can easily service and issue loans for your customers. These loans are highly customizable with a capped interest.
(3) Build your payments flow
Build and tweak your payments flow and customize it using APIs to enable payments or to connect and verify the user’s bank account.
Build best-in-class fintech products
With the emergence of API Banking providers, businesses can now build & launch best-in-class financial products & offer enhanced user experience with great ease. If you’re looking for an API Banking provider to help you build your own neobank or a fintech product or to automate banking in your existing product, head over to Open and give our platform a try.