Although APIs are a rather old #technology, they have played such an instrumental role in financial services’ transitioning from a structure of vertical silos to an open ecosystem that today no #innovation is conceivable without them. Let’s take a look.
APIs are a software intermediary that allows two applications to talk to each other, the same way as a translator would help two people who don’t speak each other’s language to communicate. They have existed almost as long as computing, but modern web APIs appeared in the early 2000s.
Financial services are not even the first business model that APIs have disrupted. Think of Netflix vs Blockbuster, Amazon Web Services vs Dell and HP, Expedia vs Thomas Cook, Salesforce vs Siebel or Uber.
As a result of the increased involvement of APIs in every aspect of our financial lives, we are talking today about the APIsation of financial services or the APIsed #economy, to indicate exactly their being indispensable in this new reality.
To understand how APIs have gradually but steadily come to dominate the entire #finance infrastructure, we don’t have to look beyond how offerings of any kind and not just finance, are being delivered today. The consuming of services has become synonymous with one particular term: applications (or better apps). We have an app almost for everything: from staying in touch with our friends online to dating to reading the news to calling a taxi, and of course when it comes to our financial lives, to accessing our bank accounts and to making payments.
As apps have therefore become the dominant way of accessing all kinds of services, APIs have become the indispensable tool that serves two main purposes:
— Enabling connectivity among the thousands of applications that we are using in our day-to-day. The interconnectedness that we take for granted would not have been possible without the fast and easy set-up of modern APIs
— Being the rails that carry probably the most important element of all: data in the form of bank transactions, account balances, payments or investments
APIs are the core facilitator behind some of the most powerful innovation triggers, driving the next wave of the #fintech revolution:
— APIs are behind Open Banking allowing product features and functionalities to be easily pulled out from a variety of applications and to be combined into processes that users with the right authorization can access from anywhere
— In turn, the power to integrate these products and services into different commercial environments is the concept of embedded finance behind the Banking-as-a-Service concept
We have long been transitioning into a reality where banking or payments apps will have a number of third-party APIs and developer services running in the background enabling what we call the platform economy. APIs are everywhere, forming the backbone of the modern economy.
Source: Panagiotis Kriaris LinkedIn's Post, Graphic sources: Cagmenini, Mulesoft
