Fintech companies are revolutionizing the finance industry and changing the way we perform our banking activities.
There are many new Fintech startups popping up on the scene to offer increasingly innovative services. The major advantage that these startup companies have is the access to open APIs, or Application Programming Interface.
Many bigger and more established Fintech companies have open APIs which open access to their programs, software and/or services. This allows new Fintech startups to innovate faster than ever by accessing this ready-made technology.
Open APIs are helping Fintech startups avoid the costs and time it can take to develop systems from scratch. Now developers at new startups can utilize the built platform and integrate it into their product. Even big banks are heading towards open banking, which can be very beneficial for banks and Fintech companies alike. By opening up their APIs, banks and Fintech firms can complement each other’s strong points and offer enhanced banking services.
In fact, banks in the EU are going to face this change in the coming year. The PSD2 (Payment Service Directive) will open all banks’ APIs and ending their tight grip on customer account data. Banks have already begun to experiment with APIs and open banking in order to start working towards modernizing their services.
New E-Money Institutions (EMI) are on the rise in Europe and open APIs are part of the reason. Many new EMI startups have integrated ready technology and built platforms via APIs from more established companies. The lower costs and faster implementation helps new e-money startups innovate much faster and efficiently.
What are the main reasons a startup should integrate ready technology via APIs?
Significantly lower costs:
Building a product using ready-made technology will be much more cost effective for companies would be able to enjoy cheap international bank transfer. Developing the product from scratch can put a major strain on resources.
Utilizing resources elsewhere:
Instead of spending resources and manpower on building a new platform, startups can utilize their resources in other ways to benefit the company.
Redirect efforts to marketing:
Startups can redirect the efforts that might have gone toward developing the product to marketing the product.
Obviously, it is much faster to implement a ready-made technology as opposed to building it from the ground up. Currently, Fintech startups especially e-money institutions are able to offer increasingly innovative services thanks to open APIs. By avoiding draining resources in the development of technologies from scratch, startups can focus on other important aspects of their business. Very good example is the Cryptocurrency industry – most of the companies are using APIs to main suppliers. So, if you are an eCommerce website, you can integrate an API to accept CyrptoCurrency at your site very fast and smooth.
In the coming year as big banks open their APIs, we can expect huge changes in the entire finance industry. Open banking and increasing financial technology will change banking drastically.