If you are reading this article, you have probably heard about cryptocurrencies. Their influence on the future of banking systems is something impossible to overlook. But you what you probably didn’t know is that the cryptocurrency economy wouldn’t be possible without the use of APIs.
And today, APIs are like a breath of fresh air in the world of banking…
Their influence is restructuring the way the industry is working. Despite the countless number of dollars spent on building technological innovations, the banking system still feels outdated. Most likely, these processes are going to speed up a little in the future.
Traditional ways of doing business are bound to be abandoned…
What is an API?
Before we take a bite of more serious stuff, we are going to talk about APIs. And the question on everyone’s mind now is probably, what exactly is an API? As simple as we can put it, API is a piece of software that has the ability to enable communication between the other two pieces of software.
Although we don’t see them, APIs are all around us. They are in all of the applications we are using every day. For example, a huge number of modern apps uses the Google Maps API to collect geo-data. The API allows the app to use this data without the developer having to write a single line of code.
By designing an API, a business can increase its user base drastically in a short amount of time, and of course, increase its revenue in the end. All of that brings us to our today’s subject – how is the world of banking being influenced by APIs.
Why are APIs so Important for Banking?
APIs are at the source of this wave of changes in the banking industry. In a few years, most banks will start offering their data to 3rd-party organizations through APIs. The top priority today is establishing the new rules that are going to formalize this. In the future, even markets will be provided with their share of regulations regarding customer choice.
This is all happening because of the changes in the IT world. By building on top of a banking infrastructure, you can create a number of interesting apps and services. Furthermore, the old rules are probably not going to apply to the changed infrastructure. A whole new type of activities is filling the gap between the banks and their customers.
The Constant Changes of Landscape In Banking Sector
The wave of changes in the payment industry is shifting the game pretty fast. The implementation of PSD2 has a deadline, and it’s closing in at an incredible pace. The banking industry landscape is going to change after that in its entirety. When it comes to shaping these changes, there are three factors that are going to be very important.
- Regulations were a connection between the two sides in the banking market. Today, regulations are opening up the banking industry. After the opening, other parties could possibly enter the market and start their own services.
- The behavior of the consumers and their expectations is something you can`t predict. Also, they are changing constantly. The consumers are expecting software that is easy to use, personalized, and fast. The consumers need to get used to the new digital way of the banking system.
- Technological innovations are going to provide new types of service to consumers. Those innovations are attracting the new flow of investments.
New API Opportunities
When APIs arrived in the banking industry, the existing system started to change. The regulations set transformation of financial services in motion. APIs are going to change the whole landscape and reconstruct the bank’s role in a chain of value. The chain of value is not entirely under the control of the banking system.
The moment the banking sector accepts public APIs, changes are going to accelerate. According to the traditional banking strategy, the bank wants to provide all the services and products possible, to all potential clients.
In order to follow this traditional strategy, the bank needs to fill all the gaps that emerged. Those changes are going to open doors to the new value chain, which is going to create the whole new financial landscape.
The Bottom Line
We came to a conclusion that changes in the banking industry are going to happen in the future. With the emerging of cryptocurrencies changes already started. Through the API economy’s influence APIs became the foundation for the future of the whole banking system. By abandoning traditional ways of doing business, there will be gaps that will need to be filled. That’s where public APIs are coming up to the stage.
Thank you for reading our article. We hope it was enjoyable as it is informative. As always, feel free to leave a comment in our comment section if you have something to add or you have some questions. We will respond on a short notice. Have a pleasant day!