Application programming interfaces (APIs) are emerging as a powerful tool with the potential to revolutionize the way financial services are delivered and consumed.
But as Jolanda Schekermans, head of product – API experience at Form3, told PYMNTS, financial institutions (FIs) and other providers must understand how APIs can and should be used to drive results and innovation, rather than simply adopting them as a technical solution.
Despite the benefits, banks may face stumbling blocks in adopting APIs due to limited experience with APIs, and they are tied to the presence of legacy systems. Schekermans acknowledged this challenge, stating that technology has developed at an amazing speed in the payments industry, and the back offices of most banks have not been able to keep up. There is still a journey for many of them before they can truly maximize the use of these new technologies like APIs.
Traditionally, she said, banks have had “no choice” but to create separate, multiple points on integration into various payment schemes, examining and fine-tuning a broad range of payments schemes and notifications — while creating redundant systems to handle all that data.
With APIs, said Schekermans, “the technical lift is so much easier than the old-fashioned documentation that you get where you have interface specs, functional specs, and all these things you have to plow through” to keep banks up and running, and connected to a particular payments scheme.
As the API ecosystem continues to expand, she told PYMNTS, FIs need to “investigate, gain clarity and knowledge about what is out there and to really talk to a diverse set of providers and organizations and step out of your comfort zone a little and talk to more than just the usual suspects.”
One way to embrace APIs’ advantages more quickly is for FIs to partner with providers, Form3 among them, to gain access to a “single stack API” that allows for an agnostic approach to capturing and delivering message-rich data payment messages, rather than linking into each payment scheme separately, with the technical heaving lifting done in house.
By leveraging APIs, FIs can reduce project and run costs, increase scalability and enhance resilience, she told PYMNTS — and those attributes will become paramount as consumers and businesses demand faster payments and greater transparency into fund flows.
The conversation came against the backdrop of the recent launch of FedNow in the United States, where the general banking landscape has been defined as one that houses multiple services for payments, lacking interoperability between systems. Schekermans suggested that by taking advantage of agnostic approaches and the opportunities that APIs provide, banks can avoid creating multiple integrations and separate message flows, and instead focus on creating a single set of operations and back-end processes.
“APIs are like any message form or syntax,” said Schekermans. “The technology itself is not a silver bullet, but the key lies in how you apply them.”
In seeking to offer up a continuum of end-user-facing services and products, developers have been seeking ways to streamline processes, future-proof their systems and drive innovation. APIs aid those efforts by reducing cycle time, improving security and enhancing productivity.
Among the key advantages of APIs is the transparent control they provide over data exposure, leading to improved data security, while underpinning the widening embrace of faster payments.
Looking ahead, she said, as banks confront the limitations of their legacy technology systems and the need for speed as instant payments become an expectation, APIs address both sets of challenges for banks “and will create more progress in the payments industry.”
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