FinTech APIs in Finance Industry: Pros and Cons
Fintech technology belongs to the type of innovative solutions that allow humanity to automate and modernize traditional processes within the banking sector. That’s one of the main ways an industry grows and advances. By now, Fintech stands for a huge sector of financial operations, which has the potential to increase its revenue from €92 billion in 2018 to an estimated €96 billion in 2024. However, these numbers are not final. You don’t know how much the industry will develop. But, be sure, there’s great demand for tech products and services.
To add, the industry already presents new approaches and tech solutions as it grows via startup launches. At least 10,755 fintech startups have launched in both Americas in 2021. About 9,323 startups launched in Europe, the Middle East, and Africa; and only 6,268 in the Asia Pacific. Some of them stay, the others — fail.
Nonetheless, you may have several questions to ask the industry.
- What are the best practices to achieve progress in the finance sector?
- How can you ensure new technologies will disrupt the software market?
- What are the examples of banking technologies you find useful today?
One of the solutions to consider is the fintech APIs. So, Let’s discuss their pros and cons and their significant impact on the banking sector.
Read more: how to build a neobank
Introduction to Fintech APIs
Banking API or Fintech API connect systems and enhance their smooth communication. But, in the finance industry, these APIs carry out the mission of better data access to all the parties involved in financial transactions. These may be banks, third-party providers, websites, and consumers. You can get the main idea of fintech APIs from the picture below:
The tendency to use APIs in fintech makes a single bank sort of a modular platform. And, due to this transformation, different third-party businesses may offer their financial services. What’s more, this is done with seamless integration of technologies between the bank and a third party. Any business chooses some of the bank services it wishes to offer its clients and does not require to have a banking license to do so.
According to eMarketer, about 30% of financial institutions were using fintech APIs at the beginning of 2021. But, at least, banks have thought about the true importance of fintech APIs. This allowed them to prioritize and invest in APIs from 35% in 2019 up to 47% in 2021. And, more than 25% of financial institutions plan to implement API in banking in 2022. Let’s hope, the tendency stays as well as the sector keeps on developing via application APIs.
What Types of Fintech APIs are Used for Application Development?
Advantages of Using Fintech APIs
Advantage #1. Faster development/time to market
One of the greatest pros of fintech API is the ability to accelerate your software development. Here. you don’t need to develop these APIs from scratch (though, it is possible!), but integrate the existing ones. Just choose what you need and APIs will communicate between systems. This allows you to reduce the time of application development significantly.
Advantage #2. Reduction of development costs
Besides shortening the development time, you can also save up a valuable amount of your budget. How? It depends on your goals and the features you will need. But, on average,
Based on the app complexity, payment getaway, the number of transactions, website type or native app, or cross-platform one, the APIs will have a different cost.
Advantage #3. Reuse of components
Via the open bank APIs, you can reuse components and save time on unnecessary deployment.
Fintech APIs that are open-source is pretty easy to be connected to. So, many developers can save lots of time and resources using these third-party banking APIs. With the help of the open banking APIs you can:
And even more. Explore all the potential benefits you can get!
Advantage #4. Time/resources to focus on innovations
Development may only seem an easy process. But, to speak the truth, requires immense dedication and management of the processes. In fact, being 24/7 in development leaves no space for brainstorming or other activities. If everyone had no time to be creative, we would not have any advancements and innovations in the industry. Thus, here’s where APIs are super handy. Using them developers relieve themselves of unnecessary work and dedicate more time to the other important thing on the project. I.e. security.
Cons and Risks of Fintech APIs
It’s a global law that pros are always followed by cons. So, let’s find out whether there are cons of fintech API and what are those!
Issues related to cybersecurity
During transaction cases, one API allows to do by accessing multiple bank accounts at once, so there is a chance cybercriminals will step in. The only solution is to implement strong security features. And, this process is quite troublesome. Mainly, because user money has to be protected and developers can spend lots of time figuring out the best option to do it.
Implementation of fintech technology
If there are lots of banks and businesses that need API communication, an issue concerning implementation occurs. These APIs will work with the biggest part of the market and implementing a seamless connection is time- and resource-consuming.
Different products in the banking industry
The fintech market has its requirements and the government has the other ones. So, you might hear about the Open Banking regulations. But lots of startups succeed without taking them into account. But, customers tend to adhere to regulations and laws. So, stepping out of these might be a problem. And, not all the customers may be convinced.
Consider Inoxoft as a Reliable Partner for the Development of Your Project
Inoxoft is an expert in fintech software development services. We build top tailored banking solutions that will enhance your business processes. Our certified engineers understand the value and benefits of fintech API and implement them for clients at our best.
With our help, you can present the greatest fintech experience for millions of your consumers using fintech API. With us, you will have a digital opportunity to innovate businesses and help them become extra recognizable in the Fintech sector.
Contact Inoxoft to experience all the advantages of using the benefits of fintech API. Our team will make sure you get only the best solution and disrupt the market of digital finances.
Originally published at https://inoxoft.com on June 29, 2022.