How to solve Fintech pain points with APIs

APIs have become the secret to success in the world of fintech. In this blog, we’ll explore how fintech APIs are transforming the industry, solving problems, and enhancing innovation. Whether you’re a fintech enthusiast or just curious about this tech revolution, read on to discover the role of APIs in simplifying the fintech landscape.

Why are Fintech APIs So Important?

In 2023, the fintech landscape boasts an astounding 26,000 startups worldwide. Despite market fluctuations, fintech APIs have seen a remarkable 19% increase in activity. Why? Because as fintech grows, APIs become essential. This growth is fueled by open banking, where fintech organizations leverage APIs to unlock new revenue streams.

Fintech APIs are like shortcuts to success. They allow businesses to save time and money by outsourcing software development to third parties. For instance, a real estate startup can access Plaid’s API for credit risk analysis without the cost of building in-house tools.

APIs also enable financial institutions to adapt faster in an ever-changing market. Unlike traditional banks, fintech companies can pivot quickly, providing personalized customer experiences.

Meeting the Demands of Younger Generations

Younger generations care more about speed and convenience. They’re less loyal to traditional banks and more tech-savvy. APIs play a crucial role in catering to millennials and Gen Z. For example, buy-now-pay-later (BNPL) solutions are loved by millions of young adults. To offer BNPL, fintech companies use APIs for digital wallets, payment processing, and security checks. This strategy attracts younger customers who prefer simpler digital experiences.

Main Challenges Fintech APIs Have Solved

Fintech APIs are flexible and can enhance various aspects of a project:

• UX Optimization: APIs improve user experiences, making processes like Know Your Customer (KYC) checks smoother and enhancing user engagement.
• Scalability through Partnerships: APIs act as growth catalysts. They allow businesses to scale effortlessly by outsourcing services, reducing the need for costly infrastructure expansion.
• Exponential Value via Interoperability: APIs and microservices make fintech apps more flexible and easier to maintain, reducing dependence on monolithic systems.

How to Choose the Right Fintech APIs

When selecting fintech APIs, consider the following factors

How to Choose the Best API

Now, you’ve done some research, looking at the numbers, competition, and potential API providers for different things your software needs. The big question is: How do you decide which ones to choose?

1. Check Reliability and Performance: Make sure the API providers you’re considering have a good track record of staying up and running without any problems. You don’t want downtime, as it can cost you money. Look into their history of staying online and how well they handle high levels of use. You can also ask their current customers about their experiences with customer support. Make sure the API can handle a lot of users without issues.
2. Evaluate Documentation and Help for Developers: It’s important that the API provider offers clear and helpful information for your developers. This includes things like software development kits, sample code, and tutorials. Having these resources makes it easier for your developers to understand how to use the API effectively. Also, see if the provider has an active community of users, as this can show you how popular and committed they are to their products.
3. Prioritize Security: If you’re in the fintech business, you can’t compromise on security. Make sure the API providers you consider have strong security measures in place, like encryption and authentication. They should also follow industry standards like PCI DSS and GDPR, depending on your location. Check their data ownership policies to ensure you have control over your data for safety and potential future changes.

Measuring API Value After Implementation

After you’ve integrated the APIs into your software, it’s essential to measure their value. You can do this in two main ways:

Customer Side

First, see how customers feel about your software with these APIs:

• User Adoption: Check if people are using the new features that came with the APIs. Compare how many people stopped using your app before and after you added the APIs.
• User Engagement: See how often people use the APIs. If lots of people use them regularly, that’s a good sign. You can also ask users what they think about the new features.
• Customer Loyalty: Look at how much people like your brand now. If users who use the APIs give your brand high scores, that’s a sign of loyalty. Also, check app stores and forums for good feedback and referrals.

Business Side

Next, look at how well your business is running with these APIs:

• Saving Time: Check if you’re saving time on tasks because of the APIs. Pay attention to tasks that used to take a lot of effort and see how much easier they are now.
• Competitive Advantage: If your app has lots of features, see how long it takes to add new ones using the APIs compared to starting from scratch. Also, count how many new users you get during this time to know if the APIs are helping your business.
• Making Money: APIs can bring in more money, like when you use a top payment processor that people like. Check not only how much it costs to use the APIs and how much extra money you make but also how well you’re doing compared to your competition.

When Not to Use APIs

While APIs are talked about a lot, they can’t solve every problem. Here are some situations where you might want to think twice about using them:

1. Complex Old Systems: If your current systems are really complicated and have been around for a long time, it might be hard and expensive to make them work with modern APIs, especially if your systems were designed a long time ago.
2. Security Concerns: Sometimes, using APIs can be risky, especially if you deal with very private and sensitive data, and there are strict rules about sharing it. In such cases, big organizations like investment banks might choose to hire their own developers to build a solution in-house. This way, they have full control over who can access their data and can make sure it’s super secure.
3. Special Systems: If your company uses unique and one-of-a-kind systems, it can be tough to find an API that fits perfectly. Instead of using a standard API that might not work well or be safe, you can talk to the API developer. They might be able to make a special version just for you, or you could partner with a company that specializes in creating custom solutions tailored to your needs.

Wrapping Up

As you navigate the dynamic Fintech landscape, remember that APIs can be your key to success. They streamline operations, enhance customer experiences, and provide the agility needed in this ever-changing industry. When wisely chosen and effectively implemented, Fintech APIs can propel your business to new heights and simplify the complex world of finance.

Do you have a project in mind? Please drop us a line presale@elmosoft.net

ElmoSoft is a leader in providing custom software development services in Estonia and visible player in EU market: TOP 10 Software Testing Companies (Global Clutch ratings). For the last 5 years, we have accomplished 250+ projects and made a sustainable contribution to Fintech & Automotive industries’ success.