Banking APIs and Benefits of Adopting them

Dec 24, 2021
4 min read

What are Banking APIs?

A bank may offer third party access to its customer services through dedicated APIs. Thus, API or Application Programming enables a third-party application to use a particular interface to access a common set of tools or services. Many third parties may then use banking services or may offer the same to their customers.

Seamless Payment Collections

Banking APIs enable an easy payment workflow for all your customers and partners. They offer a unique experience with easy money transfers supported by diversified modes of payment like UPI and QR code-based payments.

APIs to BaaS: How big is the leap?

Open banking and banking-as-a-service are both terms used to refer to financial APIs provided by banks. APIs are embedded in other services and products and APIs consumers such as Fintech provide apps with the context in which the API is embedded. This embedded context can complete the entire product lifecycle such as creating a new account for the end-user, retrieving transactions, checking balances, obtaining metadata, initiating and executing payments from that account, and even closing it.

Accelerating onboarding

Long onboarding times for new customers are one of the biggest friction points in business banking, even if your business is not in the fintech or banking domain. These APIs provide a consolidated and normalized data feed of the most appropriate KYC data which helps in expediting onboarding and creating a more complete risk profile for new customers.

Real-Time Transaction Reconciliation

Businesses waste time, resources and money in resolving transactions which is alarming. API Banking can enable virtual accounts to trace the source of each payment through your company. Your ledger will also be up to date and the bookkeeping is efficient in real-time.

When your company has a strong team to support you and is generating revenue and helping more customers. If you have already addressed the pain points, you are ahead, I mean ahead in most businesses. Otherwise no worries! It's not too late yet. Use the banking API, and optimize your cash flow cycle.

Suppose you are getting good revenue from the company. The company is helping more and more customers and also has a strong team to assist you. It would be great if all the pain points, otherwise, there is no need to worry, as the use of banking APIs can optimize your cash flow cycle.


Also, sit peacefully by automating your mundane tasks and then you will have your own team and resources left that you can use for more important tasks. For example, you can target and automate the process of collection and distribution.

Try Your Hands at Embedded Finance

With embedded finance, your business can enter a new vertical market, for which not much investment will be required. You will have new opportunities unlocked for revenue. As you get stronger in your target market, start knocking on new sectors, identify new business models and explore new verticals. A striking example is building your own BNPL product with banking APIs.

Cards & Wallets

The beauty of the card is that it allows you to streamline your expenses and generate additional revenue. API Banking can also launch your card program in a way that allows prepaid instruments to reach your customers, partners, employees and they can make cash-free purchases.

The interchange fee is the profit you accrue when you pay on these physical or virtual cards!

Streamline Credit

Being an NBFC or fintech lender, if your main product is providing lending services, or extension by leveraging embedded finance, banking APIs are used to simplify the process.

  • It is important to check the credit score of the users before providing the loan.
  • When a good customer/partner comes to you, you want to disburse the loan immediately.
  • It is always necessary to streamline and expedite the process of collection from users.

Repetitive hurdles related to banking integration

  • Compliance cycles and long waits
  • Incomplete documentation
  • No sandbox for testing without commercial approval
  • Absence of single business POC within the bank for final decision making

Why banks should adopt Open API

In order to acquire new customers, financial organizations are investing a lot of money in cross-selling to clients. Open API technology can boost the value of products or customer deposits by delegating such functions. Front-end developers developing user-friendly and intuitive banking interfaces will get the bulk of the value. On the other hand, the operational effectiveness of banks will also increase.

Open banking gives financial organizations a facelift as it improves offerings, increases customer engagement, and increases revenue from various funnels.

When banks adopt Open API, their services become better and their offerings also improve significantly. But there is also a paradox because as fintech companies get access to APIs, they also get the keys to expanding these services.

There is also a possibility that banks may distribute various applications developed by fintech companies to their customers. And that could be bad for the banks. Fintech companies can build a mobile app using bank data to manage their finances, view other real-time data, and monitor their debts.

By adopting open APIs, banks can get more customers. The bank will also live up to the expectations of the customers. But it is also inevitable that if customer engagement increases, the competition among traditional banks will also be fierce.

Open banking capabilities will introduce more entities to banks and thus generate revenue. It could also bring about incredible changes to payment methods such as you start paying through social networks or using a fintech app instead of a traditional bank's app.

Wrapping Up

If you are looking to invest in different APIs, you need to find out whether adopting APIs will help you improve customer engagement. Requirement of software and tools to provide high-quality open banking services and how you can learn from successful use cases.