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Increasing the effectiveness of your digital transformation may have come to a standstill and one of the biggest factors you could be overlooking is Application Programming Interfaces (APIs). When streamlining your banking operations, having integrated services could be the solution you’ve been looking for.
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What are APIs and how can they improve banking protocol?
APIs typically act as software intermediates when the capabilities of two applications can be of benefit to each other. The better your services communicate and display worthwhile data, the more likely they are to provide the level of usability your customers are hoping to find. When implementing an API strategy for banking, a comprehensive, insightful user experience could set you apart from the competition.
Open Banking APIs are revolutionizing the financial domain and have transformed the industry in many different ways – for employees and consumers, both. Harnessing the API potential to its full extent is important for a banking institution to remain competitive.
Banking APIs allow banks and other financial institutions or financial service providers to access consumers’ financial statements in a secure and authorized manner. Although disruptive technologies have enabled banks to enter the realms of digitalization, it has made it difficult for banks to keep pace.
What Does A Good API Strategy Involve?
A fragmented API strategy can increase OpEx (Operating Expenses) and slow down business processes. On the contrary, the right API strategy can assist banks in streamlining business operations, improving customer engagement, and achieving banking goals. To develop a highly effective banking API strategy, the experts must emphasize:
- Defining the API implementation goals
- Aligning the business and IT teams to work together
- Building a responsive API roadmap that all stakeholders can access
- Determining banking KPIs as well as marketing, and promotional tactics
Apart from this, it is important to evaluate the banking API strategy from the customer’s viewpoint. Having said that, it means thinking about the strategy as a product. This approach will help you develop a powerful API strategy as well as implement it efficiently across different business departments.
In terms of API application and how it can improve services for banks, here is a list of the potential benefits:
- Piggy-back off of the popularity of fintech disruption
APIs often support harmonious partnerships where two parties bring their own advantages to the table. As fintech banking solutions are currently shaking up the industry, traditional banks could benefit from data-sharing and more to increase their relevancy.
Open Banking APIs are revolutionizing the financial domain and have transformed the industry in many different ways – for employees and consumers, both. Harnessing the API potential to its full extent is important for a banking institution to remain competitive.
Banking APIs allow banks and other financial institutions or financial service providers to access consumers’ financial statements in a secure and authorized manner. Although disruptive technologies have enabled banks to enter the realms of digitalization, it has made it difficult for banks to keep pace.
- Build better relationships with consumers with unique needs
As technology and digital processes continue to grow in a host of sectors, the modern consumer is demanding a simpler, more engaging user experience. With the rise of social media and instant gratification, the longer your bank takes to meet customer needs, the sooner they will look for a financial provider who does. This means that APIs can help you to target a younger and more diverse demographic – and this can increase your brand’s identity.
Satisfying the ever-rising demand of consumers is a challenge, particularly in the banking industry. Open banking APIs provide financial transparency to financial institutions, customers, as well as third-party service providers. It gives a convenient and comfortable way to manage transactions digitally.
Other than ensuring transparency, deploying banking APIs enhances overall customer engagement. In the digital era, following traditional banking methods is detrimental to banking processes and the bank would likely reduce customer retention and engagement ratio. Banking institutions could experience growth after deploying the API strategy.
- Conform to newer regulations
Over the coming months, regulatory reforms could see traditional banking taking a significant hit if they fail to provide at least one unique selling point. The industry has become stagnant and with so many tools, platforms and even payment methods becoming the norm (such as transacting on the blockchain), remaining in the past is certainly going to have a negative effect.
Most importantly, regulatory reforms compel banking institutions to reconsider and reconfigure their digital strategy. Customers are getting better control over their accounts and financial transaction. Having an API allows banks to ensure higher security and give peace of mind to consumers.
Different routes such as Banking as a Service (BaaS) or Banking as a Platform (BaaP) can help explore effective and responsive strategies. Again, these routes will simplify the bank’s way to reach new partners and consumers. Plus, banks get the speed, innovation, and agility they need to keep pace with competition and scale.
Something to keep in mind is that speed can be of the essence when implementing banking APIs. The longer it takes banks to source deals, provide products and more, the higher the chances that they will already be obsolete in favour of newer, more worthwhile offerings.
APIs in this niche are less reliant on consumer-based sentiment and are better directed toward the delivery of worthwhile products and services that simply perform.
How to effectively deploy an API strategy
Initially, APIs should be considered a product that you are making use of to seamlessly align your IT and business teams and should focus on integrating internal processes. This means defining your API goals, identifying the right partners for open banking, building an API roadmap, determining KPIs, testing, managing, tracking and refining use cases to determine the most worthwhile opportunities that can promote innovation within the industry.
The pandemic really brought a deeper focus on digital functionality and traditional banks could utilise APIs to drive innovation, increase engagement and remain competitive with fintech alternatives.
