Insights

Application Programming Interface

May 23, 2022

Over two centuries ago, the first industrial revolution in Britain, continental Europe and the United States was powered by steam engines. Today, APIs are at the heart of the digital revolution.

API is the acronym for Application Programming Interface, a software intermediary that allows two applications to talk to each other. So, for example a flight pricing comparison site will use APIs to connect to each airline’s flight database and present the real-time data to website users.

So, APIs are especially valuable for guaranteeing speed and safety in the exchange of information and offering the agility needed to provide greater transparency, and as a result, build rich client experiences.

In the financial services industry, an API allows developers to access a financial institution’s data without them having to interact directly with complex back-end systems. APIs provide a fast, secure and cost-effective way to share financial data and are reshaping the global financial services landscape.

Financial services are evolving fast. Clients are increasingly demanding more efficient and personalised services from fintech. By the end of 2020, as many as 1.9 billion individuals worldwide actively used online banking services, and that number is projected to reach 2.5 billion by 2024. People all around the world want to manage their finances digitally. According to a Boston University study, it is estimated that by 2025, 30% of the world’s revenue will be generated through APIs.

The main benefits of this new API-based financial ecosystem is opening doors to a whole new range of financial products, providing consumers and clients personalised services at a lower cost. For organisations, it means better information when assessing risk, having a 360-degree view on a business developing deeper insights to inform data driven decision making and much more.

The benefits of API technology can be encapsulated as:

• More information, less risk: thanks to open banking’s transparency and “free access” to banking information, previously excluded consumers and businesses will gain access to some financial • products and services

• Improved services: with a more detailed view on a customer’s financial data, financial providers gain a better understanding of the situation and offer more granular services, products, and advice

• User experience optimisation: thanks to open banking, the workflow and paperwork regarding bank loans, opening a new bank account, or any type of bank process, is simplified and processing time reduced

• Fraud detection: financial institutions can now prevent fraud more efficiently by accessing information through different sources. Thanks to the appearance of more secure interfaces, the identification and authentication of customers is improved.

At EWG, we recognise that a digital banking solution needs to integrate seamlessly with clients’ in-house systems, delivering reduced data re-keying and presenting real-time payment data conveniently in a ‘single pane of glass.’ Our market leading platform is supported with a toolkit of account management APIs that offer frictionless access to the essential building blocks of our cross-border payment engine.

For businesses using such a platform, the opportunity exists to select and integrate the components clients wish to use in order to create a custom solution. Irrespective of how they choose to integrate the platform, the system will provide automatic notification when transactions complete, providing users with up to the minute information on their accounts. We can also generate reports tailored to reflect the style of reports already produced in-house.

Services utilising these types of APIs have evolved and a variety of distributors are now embedding deposits, lending and payment products directly within their own offerings. The future lies in further tailored propositions – companies are starting to develop increasingly sophisticated schemes crossing product lines in order to meet unmet money management needs.

This allows all the different layers of a solution to be presented as a single product or digital service. That is not an easy proposition to replicate with less nimble, traditional, bank products. Their clients cannot access bespoke and integrated solutions to an appropriate level in comparison with API-first banking solutions that offer the flexibility that modern organisations require.

Fintech businesses have created a global demand for payment services that are expected by consumers from the extensive use of technology. Many companies are unable to cope with this on their own due to complex, regulatory regimes and the lack of necessary expertise. Banking as a Service (known as BaaS) therefore presents an opportunity to meet this natural demand as end users are becoming less and less of the opinion that financial services should be provided exclusively by banks. Wealth managers and insurers are able to team up with non-financial businesses and offer digital banking services such as mobile bank accounts, loans, debit cards and payment services, without needing to obtain a banking licence of their own.

A number of EWG clients utilise our services via API and the increase in engagement is significant. We fully intend on supporting this growing trend in popularity by continuing to focus on the end-user and their experience which will enable our clients to grow even faster and in doing so, drive an exciting future for the company.

These are just some of the many ways in which API-driven collaboration is changing financial services. One of the most exciting aspects is that it has paved the way for more innovation. Embedded finance is going further still with what API technology can offer fintech and estimates are that it will be worth a staggering $7.2 trillion by 2030.

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