Open APIs: Benefits, Development, and What to Look for in Your Community Bank's Hosting Provider

Open APIs: Benefits, Development, and What to Look for in Your Community Bank’s Technology Provider

Daren Fankhauser

SVP, Chief Development Officer & Chief Architect

Data Center Inc.

Open APIs: A Breakdown

In today’s rapidly evolving Fintech market, Open APIs serve as a transformative force for community banks. Offering new opportunities for expanded digital capabilities, Open APIs lead to enhanced services for consumers (like remote account opening or the management of mobile transactions) and increased profitability for financial institutions. So, what exactly is this magical piece of banking technology?

API stands for Application Program Interface and serves as a connection between a third-party application and a bank. By making the tools and services of a bank available to a third party, (like Chime or Acorns for example), both entities benefit from enhanced digital solutions and specialties. Open APIs work similarly but go a step further in allowing third parties to access the data of banking customers. This data can include the account holder’s name, account type, transaction details, etc.

As sensitive as this data is, when handled with care, the sharing of customer information leads to the improved relevance and convenience of banking services. For customers, this can look like customized investment plans, real-time updates, budgeting assistance, and more. For banks, this looks like increased customer satisfaction through competitive, flexible offerings.

Built to ensure platform-agnostic operations, Open APIs function compatibly across all systems (whether MacOS, Windows, or Linux) and lead to augmented digital services and capabilities. As such, understanding the specific advantages provided by Open APIs and how to ensure your technology provider optimizes them is crucial to successful open banking.

Benefits for Developers

In the context of development, the benefits of Open APIs are vast and substantial. Explore said benefits below:

  1. Self-Documentation
    • Documentation is built dynamically, remains consistently up to date
    • Commonly deliverable via HTML or PDF
    • Handy access for Developers (via HTML-based documentation sites) to test API endpoints
  2. Compatibility
    • Data format is programming language independent, lightweight
    • Allows for complex data structures while remaining human-readable
    • Information is accessible through nearly all devices or platforms
  3. Accessibility
    • Readiness via standard web technologies
    • Straightforward integration process for developers
  4. Security Through Strong Controls in Place
    • Protection via encryption technology
    • Keys and single-use tokens
    • Firewalls that increase the detectability of intrusion
    • Granular security controls that limit entry to required access points
  5. Functionality
    • Functionality can be pulled into other applications instead of being trapped into exclusively using the main interface
    • Access to different sub-areas of the application can be granted without exposing the entire application
    • For applications written to consume an Open API, a “sandbox” can be used to invoke the API using test data

With such value-enhancing benefits riding on the successful utilization of Open APIs, it is paramount for financial institutions to know what to look for in their technology provider.

Identifying Your Technology Provider of Choice: Security, Access, and Support

As security plays a foundational role in all financial operations, banks must feel empowered by the knowledge that their data, which lies behind these APIs, is well secured. Adherence to industry standards for security on the part of technology providers is the best way to ensure data protection.

While true security necessitates that access to sensitive information be limited, it is optimal for the API documentation to be dynamic and accessible by the financial institutions they serve. Should challenges present themselves in the utilization or access of the APIs, adequate support is also essential. As such, it is advantageous to ask questions surrounding the support protocols that the API provider offers for developers and integrators specifically.

Crystal Liebl, Development Web and UI Officer at DCI, speaks to the importance of provider support, saying, “While quality APIs are self-documenting, it’s crucial to have a vendor like DCI that can assist promptly with any challenges or questions that may occur. Commitment to great support is key to ensuring a smooth and quick implementation process.”

Further Considerations: Performance and the Absence of Middleware

In addition to support, technology (however obvious it may seem), is another crucial piece to the success of open banking. Many providers tout their technological agility, but what does that look like? When running on and being backed up by the latest and greatest technology, consistent, quick response times are the result. System redundancy optimizes uptime and ensures business continuity. 

One marker of agile technology and performance is found in providers able to deliver all the pieces necessary without reliance on middleware. Providers who enable integrators to work directly with their company eliminate extra cost, vendor due diligence, and additional network hoops often required when bringing middleware into a relationship.

Noting DCI’s experience in this realm, Liebl shares, “We encourage direct integration as a means to reduce cost and receive information firsthand from the experts who wrote the APIs. Through outstanding developer support, there’s no chance for misinterpretation leading to costly delays or refactoring amidst implementation efforts.”

Conclusion: Flexible Offerings Through Open APIs as a Leg Up for Community Banks

By exploring the many benefits Open APIs bring to community banks in the Fintech market, the transformative potential such technology holds becomes increasingly evident. Features like self-documentation, compatibility, accessibility, security, and enhanced functionality work together to empower banks in delivering flexible, customized solutions. From there, a strategic partnership with a technology provider that adheres to industry standards for security, offers accessible documentation, provides reliable support, and embraces technological breakthroughs makes all the difference.

Catalyzed to drive innovation and position themselves as leaders in the dynamic and ever-evolving Fintech landscape, no longer must community banks wait for technology processing updates in programming. Expanded digital capabilities for customers and institutions alike are always within reach through Open API technology.

References:

Agarwal, A. (2022). The Differences Between Application Programming Interface, Open Banking And Banking As A Service. Retrieved from https://www.forbes.com/sites/forbesbusinesscouncil/2022/04/26/the-differences-between-application-programming-interface-open-banking-and-banking-as-a-service/?sh=38cb5f529f40