What is an API?
API is the acronym for “Application Programming Interface”, which is a software intermediary that allows two applications to talk to each other. API’s provide a secure framework and standardized process for applications to work as a team and deliver requested information without additional user intervention. In utilizing an API, a company can remain nimble and efficient in the marketplace while also providing additional value to the end-user with less time spent searching for information.
How can you benefit from using an API?
An API can save a company time and money while providing a better experience for their user. Companies, such as Amazon, have benefited from utilizing internal API’s to create better workflows and optimize transparency across the organization. Other API’s include Open API’s, which allow for external use and either are offered free or typically subscription based. Lastly, Partner API’s allow for use from those that have a business relationship with the company offering the API. Partner API’s allow for greater control on the creating company’s behalf, as well as further allocation of resources.
How are API’s Used throughout Society?
The three industries that have reported increased usage of API’s are Financial Services, Manufacturing, and Technology. Healthcare, Telecom, Verification Services, and Government are among other sectors that are adopting API usage. Executives have begun to have an increased focus on API’s due to competitive outlook, profit potential, and regulatory requirements.
In the financial services sector companies like Plaid have seen explosive growth as companies are looking to scale and offer a better service for their customers. Plaid allows consumers to connect their financial institutions into a single view with the company they are engaging in services with. Among other companies disrupting the financial services industry, Stripe’s software and API’s allow businesses to manage their finances, as well as accept payments and send payouts. Lastly, in a world of new applications arising day by day, Zapier is allowing access to over 3,000+ integrations to connect applications with ease to continuing allowing for an efficient workflow and positive experience.
Without the assistance of technology, verifying someone’s identity or running a background check is no easy feat. It involves completing lots of paperwork, making numerous phone calls to companies or other third parties, and conducting tedious research across multiple databases. While critical to do, the process eats up too much time.
Identity, background, and employment verification APIs simplify the process and retrieve the required data quickly. The modern tools help businesses and other interested parties verify what they need to know to move a pending transaction forward. A few notable identity, background, and employment verification APIs include Trusona (authenticates identity), Truework (verifies employment), and Checkr (checks background).
How are FinTech API’s Changing the way we Interact with Financial Data?
Image from CB Insights
API’s are fueling innovation across payments, banking as a service (Baas), accounting, financial markets, and banking. Adoption has arisen as many companies have resulted in the pace and ease of integration within their current offerings. Earlier, traditional banking used to be a close ecosystem. But, as consumer tastes and preferences have changed there has been a shift in API usage that has enabled banks to become data-driven institutions that provide a broader range of products directly to customers from the platform of their choice rather than restricting it to them. This adoption has allowed banks to offer a better customer experience, while opening up various channels of revenue coupled with continuous innovation.
API’s are the reason you can pay for a cup of coffee or pay for an uber/lyft straight from your phone. In a recent survey, 93% of consumers said they utilize their smartphone when shopping and 87% of retail respondents said they have increased their investments in IT as they further digital transformation. Retailers are utilizing API’s to offer multiple payment options for their customers, as of now most payment options are still card based. A fully connected ecosystem that can seamlessly integrate new payment types, new authentication methods, and new channels will be essential to both attracting and retaining, consumers.
API’s have additionally revolutionized commercial and residential lending. API’s have provided lenders with additional data to help in making lending decisions, as many have looked at traditional requirements which has turned away potential borrowers. Lenders can now assess alternative data, such as historical income and current banking balances, and have a more sophisticated scoring system due to the data being collected. This has also resulted in favorable rates and financing opportunities being offered.
Lastly, API’s are aiding in the rising trend of “Buy Now, Pay Later”. The BNPL trend allows consumers to pay for an item in future installments, while owing nothing at checkout. API’s have offered a seamless experience for customers during their BNPL journey, as well as offered a unique way of lending during uncertain times. APIs ensure that suggested deals are relevant to the user, payment information is saved for fast checkout, and the experience is precisely to the user’s preferences.
What is the state of security with API’s?
Institutions utilize API’s to connect services and transfer data. Among these transfers sensitive data such as financial, medical, or personal information can be exposed in a suite of ways. This being said, if you are utilizing a third part application to connect your API it is crucial to understand how information is funnelled. A few ways to strengthen your API security include the use of tokens, encryption & signatures, identify vulnerabilities, utilize quotas & throttling, and/or use an API Gateway.
How do you get started with an API?
- Select an API - Evaluate Cost (Free API’s versus Paid API’s) and Ability
- Request an API Key
- Review the API Documentation - Instruction manual about how to effectively use and integrate with an API
- Write a Request to an Endpoint
- Connect your Application
Where does ModernTax fit in?
Modern Tax is brand new to the identity verification and BaaS API scene. One of its primary functions is helping banks process loan applications by supplying income information from the Internal Revenue Service (IRS). With the consumer’s consent, the cutting-edge tool connects directly to the IRS database, gleans more than 250 pieces of data from verified tax records, and provides the lender with what they need to know in three minutes.
Modern Tax also effectively verifies a consumer’s identity. To use the tool, the consumer must enter their social security number and answer security questions to access their IRS tax account. The best part? They never need to leave the financial institution’s app or website to do it.
Developers for banks can easily create a customer-facing portal that features the institution’s branding. The API is fully encrypted and safe to use. Multiple plans are available to suit different needs and budgets.
Progress means that each new wave of technology improves upon the one that came before it. Sophisticated and modern APIs are completely revolutionizing how people bank and complete other transactions. Efficiency, simplicity, speed, and customer service are the current driving forces behind API development - and we don’t expect those to change anytime soon. We’re excited to see what the financial tool API economy looks like a year or two from now!