Open banking is one of the most significant developments in the banking sector, which uses APIs. It has made specialized financial services accessible to consumers and businesses with total safety and increased effectiveness.
The modern banking sector frequently pioneers new technology and reaps its benefits. One of the main reasons top banks worldwide are adopting unique technology faster than ever is to meet clients’ changing needs and compete with one another.
API enables third-party applications to access a specific interface and standard tools or services. This means that a bank can provide special APIs for other parties to access its specialized services in the banking industry. Third parties can then employ banking services or offer the same to their clients. Banks provide all the resources and functionality required for developers to create robust and effective banking APIs, from beginning to end, including testing and live deployment.
What Are the Benefits of API Banking for Banks?
Banks can better serve consumers who don’t live close to physical branches or prefer internet banking by digitizing their services via API for banking. Internet banking APIs are making digital banking much more common, and there is still room for expansion.
Mobile banking usage skyrocketed among families with bank accounts. In 2017, it was 15.1%, and in 2021 it reached 43.5%, becoming the most popular primary way of account access. However, that number has been falling continuously as more people use online or mobile banking to interact with their accounts.
Banks were under pressure to quicken their digital transformations due to the COVID-19 outbreak. As more clients opted for internet banking in 2020, US Bank, for instance, stopped hundreds of branches in various locations.
Fintech applications are rising in popularity alongside digital banking. Users of digital-online banks, such as Chime, increased in 2020 as consumers faced with financial instability sought ways to receive their stimulus cheques more quickly. In place of their more expensive human equivalents, dependable robot advisors are now available. Many consumers no longer use traditional money transfers and apps like Venmo and CashApp that work based on banking API.
Overall, banking APIs enable financial organizations to provide their clients attractive functionality. It is reasonable to assume that the creation of APIs and their integration with banks benefit clients in various ways. Customers can conveniently simplify all activities, save time on transactions, access services and products they may require, and provide simple, practical solutions to every issue.
API Banking: What Is The Future?
Due to consumer preferences, competitive pressure, and the rising popularity of open banking, banks are under tremendous pressure to adopt API banking.
Mobile banking has seen tremendous growth, while branch and ATM banking has been steadily declining among consumers for years. According to FDIC data reported by ABA Banking Journal, mobile banking was the principal banking channel for 34% of middle-to-high-income adults under the age of 54 in 2019, compared to roughly 6% in 2013.
Deloitte predicts that the FinTech sector’s worth will reach $179 billion in 2022. It’s important to note that since 2017, revenue for the industry has almost doubled globally, and it was worth $90.5 billion five years ago, and the number has increased by a staggering 97%. As of 2022, about 65.3% of US citizens used digital banking, according to Statista. So the future of API banking is no doubt going to boom in the future!
Banks are under pressure from competitors’ actions to adopt banking APIs. For instance, the revelation that Goldman Sachs, Citibank, and Barclays were entering the API banking space was included in the release of Stripe Treasury, a new service from fintech company Stripe that advances payments and provides microloans to merchants in collaboration with Stripe Capital:
Stripe is offering standardized access via APIs to the worldwide banking capabilities of its bank partner network, which include Goldman Sachs Bank USA, Evolve Bank & Trust, Citibank NA, and Barclays as US partners and Citibank NA and Barclays as global expansion partners.
Smaller financial institutions and the peers of major banks now need to participate in API banking to keep up.
Then there is open banking, which is already well-liked in the UK and is gaining popularity in the US Open banking is leveraging open APIs for banking to grant access to consumer banking and other financial data to outside parties, such as fintech.
What distinguishes open banking from plain old API banking? It is the same at individual banks and fintech: cooperating businesses utilize banking API to share data and promote customer services. However, the open banking framework differs because it makes these collaborations available to everyone, which is a higher-level difference. All banks are required to make their services accessible via API for banking.
Open banking allows incumbents to work in partnership with fintech rather than competing with them to meet the rapidly expanding demand for financial services. Open banking is changing how incumbent banks interact with their clients by changing the notion that users should own transactional data instead of their respective financial institutions.
The significance of APIs in banking doesn’t need to be emphasized, and you should be aware of the importance of this quickly developing technology. The process of testing and choosing the best API is labor-intensive, so the API provider must be chosen with equal importance. DigitalAPICraft is One APIMarketplace to assist you in building an active, vibrant, and hyper-personalized banking API ecosystem. You can check our API for banking services page for detailed insight.