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Introduction

In today’s world consumers can make the payment on their favorite e-commerce site via payment gateway on the go, and with third party authentication software’s Digital KYC gets completed in no time. One can invest in Mutual Funds, stocks via API interfaces from their bank-of-choice swiftly. Fintech companies are sanctioning loans to their consumers within five mins post-checking the credit score in a real-time. The benefits go on from booking flight tickets to using smart devices for day-to-day needs or using Facebook and Google interfaces to sign into the websites. From the above examples, it is evident that APIs play different roles in our daily walk of life behind the scene. API’s are fast, secure, reliable, and efficient and help eliminate barriers to achieve the organizations' desired goals.

“It is not the strongest of the species that survives, nor the most intelligent that will survive but the one most adaptable to change”, the above statement by Charles Darwin holds very much true during the current pandemic that the world is facing. The COVID-19 Pandemic has made the point that DIGITAL is the new way of life and it is the way forward. It has mandated every business to operate digitally overnight to survive.

Our world is now more digital than ever before, and we cannot imagine living in the 21st century without internet. As per the statista report of July 2020, 4.57 billion people were active internet users encompassing 59% of the global population. This number includes tech-savvy millennials who prefer interacting with banks and financial services via online mediums that are secure and mobile-friendly. This necessitates all banks and financial institutions to innovate themselves to offer cutting-edge technology-enabled services to meet the new tech-savvy generation's needs and get the lion's share of the market. Digital applications have not only become necessary, but they are now an integral part of today’s business era hence APIs (Application Programming Interfaces) have become more indispensable than ever before.

What is API?

API stands for Application Programming Interface. It is a set of protocols that define the interactions between multiple software intermediaries. In simple words, it is the technology under the hood, which connects one or more applications to communicate and exchange the data in real-time.

API Service

Why use APIs and what are their benefits?

APIs have been around for decades and they have the proven potential to transform businesses by offering a world of possibilities to banks and financial institutions. According to a Research and Market report, by the end of 2024, the global API management market size is expected to reach $6.2 billion from $3.02 billion in 2019. Based on the recent survey conducted by Cloud Elements, 83% of major global firms from 44 countries consider API integration a critical part of their business strategy to drive digital transformation initiatives. 77 % of the firms who participated in the survey also said that they have invested in API Management.

Below are some tangible benefits of using APIs in banking and financial Institutions:

  1. Opens new revenue streams and opportunities: Banks and financial institutions can monetize their services by sharing the data through API’s and collaborating with FinTech partners and other players. For e.g. Open banking API
  2. One platform, multiple services: By integrating the applications internally and externally, banks can offer multifold multi-dimensional services to their customers. For e.g. A net banking platform can offer investment opportunities, loans, currency transactions, payment services and so on
  3. Competitive edge with market share: Early adopters will be able to gain a competitive edge and capture the market share
  4. Business agility and streamlining of operations: Real-time integration of data from multiple systems helps banks and financial intuitions to take the right decision at right time. Real-time access to data will also help businesses to maintain costs and eliminate bottlenecks across various service levels. API management helps in automating the tasks and offers opportunities to improvise the service offerings
  5. Cater to the needs of millennials: Tech-savvy millennials understand today’s digital landscape and have high expectations around digital experience. They look for personalized products and services to meet their unique needs to be delivered quickly. For e.g. Asset and wealth management web portals/apps
  6. Meeting regulatory compliance: Regtech APIs can be a real savior for banks and financial Institutions for tasks such as regulatory reporting, transaction monitoring, compliance, identity management & control. For Ex: Payments Services Directive (PSD2) in Europe
  7. Cost effective support for business: APIs enable companies to grow their businesses faster. The beauty of the API is that it does not require firms to modernize or migrate the legacy systems or IT architecture to a new one, but services can be leveraged on the existing systems via API technology
  8. Help to focus on the core: Firms could leverage the power of APIs to free-up time that goes in mundane activities. Instead, they can invest their freed-up time and effort to focus on their core functions, for Ex. using third party authenticator services for KYC and onboarding

How do APIs work?

We understand that an API is a messenger that takes requests, translates and delivers responses between receiver and provider. Let us simplify and understand this with an example of a customer at a restaurant with a menu to order from and a waiter and kitchen. Here the waiter acts as an intermediary (API) between you and the kitchen to communicate and deliver your food choice.

API Works

List of API technologies

The latest Forrester Wave report 2020 on API Management Solutions lists 15 providers that matter most and how they stack up based on the 26-criterion evaluation listed below:

SI no

Vendor

Product evaluated

1

Axway

AMPLIFY API Management

2

Broadcom

Layer7 API Management

3

Google

Apigee

4

IBM

API Connect

5

Kong

Kong Enterprise

6

Microsoft

Azure API Management

7

MuleSoft

Anypoint Platform

8

Perforce Software

Akana by Perforce API Platform

9

Red Hat

Red Hat Integration

10

Sensedia

Sensedia API Platform

11

Software AG

webMethods API Management webMethods.io API (cloud version)

12

TIBCO Software

TIBCO Cloud Mashery

13

Torry Harris

DigitMarket API Manager

14

Tyk Technologies

Tyk API Management

15

WSO2

WSO2 API Management Platform

Use cases from the banking and financial services

Here are some of the use cases representation used in the BFS domain at a high level.

Case from BFS

How can Mindtree help you?

A company without APIs is like a computer without the internet and you would consider such a computer as obsolete. Banks and financial institutions without APIs would not be able to connect internally and externally with the rest of the digital world. Organisations need to ensure services offered to the customer are intact and meet the needs. The right API solution can unlock the great potential to create new products, services and collaborations. Our API Strategy is purely driven by our commitment and continuous engagements with customers. Mindtree has a long-standing strategic partnership alliance with leading solution partners. We have worked with businesses across BFS in all sizes, helping them on API management. Organization’s need to understand where they are on the API journey and its maturity. We have created an API maturity model based on various maturity parameters, capabilities, and possibilities to provide organizations with the means to assess their API program maturity. To find out more, get in touch with one of our experts today.

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About the Author

Preetham Shivalingappa
Senior Consultant

Preetham is a senior consultant with Mindtree BFSI vertical. He has 12 years of industry experience and is a subject matter expert in capital market domain. He is responsible for leading domain consulting and domain competence building.

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