June 12, 2024

Fresh Online News

Fresh Online News Blog

What are Financial APIs? How Are They Change the Financial Market?

5 min read
Financial APIs

To understand exactly how financial APIs or open banking API sandbox are changing the financial market, one must have some sort of familiarity with the term ‘Financial API’ and its meaning. Financial APIs enable access to financial institutions’ data without any direct contact with their back-end process. It’s a safe and secured as well as an effective method of sharing financial information. For example, if a financial institution has 5 to 6 branches in different cities, the financial API that makes them connected to each branch’s data. The introduction of Financial Data APIs has completely changed the outlook and growth of the global financial sector. However, not only institutions are getting benefits from this innovation but customers are also getting the perks.

 Did you know what is API sandbox? It’s a testing tool used by testers to replicate the features of a production environment and create the simulated responses from all other APIs being used by an application. This tool is used by the Fintech and Third-Party Payment Service Processors in PSD2 Lingo to keep on testing and monitoring. This sandbox platform is a greater supporter of multiple API gateways and aids in increasing the scale of sandboxes required.

The Working of Open API Banking Platform

Open API Banking platform enables seamless communication between two apps like a financial institution and FinTech company. For a Crystal-clear understanding of its working, let’s walk through some cases:

  1. Development of PFM Application

To understand the PFM application development, we’ll dive into a real-world example. Suppose, a FinTech company has decided to launch a budget management application. This needs customers’ data and bank account information enabling them to recommend personal budget management services to users. Now,this data can be obtained from existing financial service providers who have ample data stored in their system. Therefore, after taking permission from the clients, the data will be shared with the third-party app developers team. Financial APIs enable access to financial institutions’ data without any direct contact with their back-end process.

Now, if a financial service provider is thinking to develop an automated budget tool offering personal financial guidance to users, then who’ll assist them in the project? Of course, they’ll share data with FinTech startup companies through open banking API. Furthermore, when financial institutions’ data will be shared with Fintech startups, they’ll get an opportunity to utilize it to widen and update their open banking API.

In this cycle, all three parties get an advantage in the following mentioned manner.

  • Financial Institutions- They get a chance to make changes in their offerings and bring some innovations.
  • FinTech Companies- They get access to rich information offered by financial institutions.
  • Customers- They get better customize financial guidance to manage their budget and hence, keep their financial goals at good.

Development of Secured Application Ensuring Safe Data

The security of financial data is more significant and financial institutions & FinTech companies are taking it seriously. They both are commit to delivering a safe and secure banking experience to their customers.

For Example- A bank is planning to develop an app that can easily capture fraud transactions or fake accounts. In this scenario, they can ask the FinTech firm to keep a check on all accounts in no time. The reason being is that these firms have machine learning technology and artificial intelligence expertise to investigate the transactions and accounts instantly. It will make the process smooth and assure customers as well that their bank accounts are in safe hands.

Why is the Demand for Financial APIs in Banks is increasing?

The companies, financial institutions, and banks who are not using financial APIs to improve their customer’s experience will soon lose an edge over the market. Sooner or later, they’ll need to adopt API in their organizations.

Millions of Innovative Opportunities

API enables firms to save ample time, effort, and used it for refining their services are also more efficiently. That’s why it is advise to banks to share their financial data with third-party apps through open banking API. This way, they’re letting a specialized team of FinTech innovators streamline the time it would take an internal team to develop new technologies. 

Detailed Client’s Insights

FinTech firms offer customer data with the help of open banking API’s also which help get highly trend customer insights. This allows them to change the services and launch the product as per customers’ trends. 

Personal Recommendations

Getting open access to clients’ data, trends, and pattern enables FinTech Service providers to send personalized financial services in a matter of minutes to customers. This way, it’s a better way to increase clients’ engagement with financial products and enhance your customer experience. 

Higher Return on Investment

Nowadays, Banks would like to outsource work to FinTech companies that are specialize, expert and API integrate. In this manner, the higher rate of return is also around the corner for Financial API’s companies. Don’t miss out on new customer bases, revenue, new technologies, and market influence. 

DigitalapiCraft- India’s Leading Financial API’s Provider

DigitalAPICraft is a specialized firm for building APIs for the Banking and healthcare sector. Their in-house team builds robust, scalable, and customized financial APIs, open banking API sandbox. One APImarketplace solves many problems without much hassle. Available in SaaS and on-prem versions, it is API platform-agnostic and also seamlessly connects your APIs, developers, product owners, consumers, and partners to one server and delivers the best API ecosystem experience. They are also helping enterprises create and grow 3rd party ecosystems with rich, smart, and transactional Open API Sandbox. 

Final Thoughts

The idea and potential benefits of adopting Financial APIs or Open Banking API sandbox are infinitely many. Improved services, low risk, fraud detection, access to rich data, and several more benefits. This is the major reason why banks, corporates, and all IT companies are more emphasizing developing and also cutting-edge API strategies. Any delay in adopting the API’s can lead to losing edge over the thousands of customers. Therefore, contact DigitalAPICraft as they help you to build automated ready API tools that craft great developers and customer experience. Get in touch with them today and discuss your project requirements right away!

About Author