In the past 12 months, I think it’s safe to say we’ve all done a lot more online shopping than we ever expected to do, whether it’s safely crossing names off your holiday shopping list from the socially distanced comfort of your home or using a service like DoorDash to order dinner on a busy weeknight.
As a self-professed API geek, sometimes I like to take a step back and think of all the subtle ways APIs have improved our lives, and online activity like this is a big one. Think of how easy it is to log in to DoorDash using your Google account, or to choose “Pay with PayPal” when you go to check out with your favorite online boutique. Those are APIs at work, making it quick and seamless for disparate technology to talk to one another for a faster, smoother user experience.
These conveniences that we now see as a given were once on the bleeding edge of API technology, and it’s fun to think of how far we’ve come — as well as what might be on the horizon, especially for the financial services industry. I’ve rounded up a list of five ways I think APIs will impact the banking industry in 2021 (and beyond).
#1: Open APIs and the rise of open banking
Perhaps the biggest development on the horizon is the growing popularity of open banking and the open APIs that enable it. Put simply, open banking is the practice of sharing financial information electronically, securely, and only under conditions that customers approve of, according to The Balance. The goal of financial institutions sharing this data is to make it easier for software engineers to develop APIs that make smarter use of customer data in order to provide a better customer experience. As more financial institutions dip their toe in open banking, there will be more and more opportunities for API developers to create data-driven interfaces that provide new and innovative ways to serve customers.
Example: WalletFi helps account holders manage and make better decisions about their finances through analysis of their recurring and subscription charges. To accomplish this, they needed to integrate with various account data aggregators. Integrating with Plaid gave WalletFi’s users the ability to easily enter their account credentials and connect seamlessly and securely with any accounts they wished.
#2: Bridging the gap between banks and fintech
Fintech providers are crucial to the banking industry, as they provide the innovative software that elevates customers’ banking experience. But for some financial institutions — especially smaller community banks and credit unions — integrating fintech solutions with their own core platform can be burdensome or prohibitive. That’s where a well-designed API can really shine, acting as an interface between the slick fintech solution and the bank’s core system. And especially as open APIs grow in popularity, the gap between banks and fintech can start to be more easily bridged.
Example: Accrue is a digital lending and banking platform for community banks and credit unions. All financial institutions have a back end that serves as a general ledger and source of truth for customer accounts. Many use core banking providers, such as Jack Henry or Fiserv. Core10 helped Accrue integrate with a number of core providers so that community banks and credit unions could more easily serve their customers and keep all the records reconciled.
#3: Improved customer experience
Customer experience is (or should be) at the heart of everything a bank or credit union does. And with more data becoming available on customers’ activity and financial needs, APIs are uniquely poised to help financial institutions offer their customers more functionalities that are tailored toward their needs. Perhaps it’s easier fund transfers, or perhaps it’s the ability to set better alerts. Whatever the specific function, APIs enable banks to connect more seamlessly with their customers, and that’s a win-win.
Example: Constellation Digital Partners is an open development platform that facilitates mutually beneficial relationships between credit unions and fintechs, eliminating burdensome financial barriers to digital banking for credit unions. For this to be effective, Constellation needed a platform that offered basic banking functionality including accounts, transactions, transfers, and alerts for credit unions to provide for their members. Core10’s team built the basic banking system in a way that centralized features from numerous integrated third-party providers.
#4: Streamlining online account opening
Since the coronavirus pandemic hit, one big change the financial services industry has seen is a decrease in foot traffic for traditional branch locations. While most larger institutions already had online account opening functionality, many smaller banks were left scrambling to catch up. The right API can help make online account opening, loan origination, and payment processes smoother and more intuitive, so your institution is ready for whatever comes next.
Example: Coastal Credit Union was looking for a way to increase the number of credit cards opened by their current and new members. To do this, they sought to integrate with MeridianLink to enable digital decisioning and account opening. Core10 provided this integration and user interface design to increase credit card applications through an efficient and intuitive process.
#5: Working smarter, not harder
Implementing APIs can go a long way toward reducing human error and freeing up resources. Remember that large financial services firm who needed help integrating their mortgage loan origination system application with the ICE Mortgage Technology SDK? APIs are perfect for cutting down on busywork, minimizing errors, and maximizing the level of service you’re providing your customers, and I think we’ll see a lot more of this in 2021 as banks come out of a tough pandemic year and look to recoup some lost ground.
No matter what 2021 brings, I predict APIs will play an integral role in better utilizing customer data, leveling the playing field for banks and fintech, improving customer experience, streamlining common bank functions, and helping your employees make the most of their time. And if API integration is in your roadmap for the year, Core10 is here to help.