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Fintech APIs (that’s short for application programming interfaces) connect financial services and service providers to create better experiences for customers. This interconnectivity is driving major growth in the fintech industry.
In this article, we’re diving into what fintech APIs are, their uses, as well as their advantages and shortcomings to give you a better understanding of the role these programs play in driving developments in the fintech space. We’ll also take a look at how they can benefit your business.
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What Are Fintech APIs?
An API is a set of protocols and tools that enable two or more pieces of software to communicate with one another.
Fintech APIs became popular in the mid-2010s when banks in the UK, Europe, and Asia began to be required to create open APIs that would allow third parties to access customer data. This drove the development of a variety of fintech tools, which allowed you to do everything from comparing product prices to making payments and managing your money.
You can think of APIs as the building blocks of software development. They can be easily integrated with your existing website or app and customized to suit your specific needs. In the fintech space, APIs allow the parties involved in financial transactions to transmit information and data among themselves.
Developers can access and use services provided by a fintech platform – for example, payment processing, buyer authentication, or fraud detection – instead of having to build them from scratch.
This is convenient because of the sheer number of programming languages that can be used to create software. Although there are only a handful of popular coding systems, there’s no standardization around which languages are used to create software. As a result, it’s likely that many of the platforms your business uses won’t be automatically compatible with one another.
APIs act as a translation tool, linking programs written in different languages and making the transfer of information possible. They also have built-in security measures that allow for the exchange of data without revealing the information that’s being transferred between the two programs.
Examples of Use Cases for Fintech APIs
The modular nature of APIs means that these pieces of technology have become increasingly popular over the past couple of years. Let’s take a look at some of the ways APIs are being used in the fintech industry.
Banking
With consumers becoming ever more price conscious and convenience focused, it should come as little surprise that banking APIs have been instrumental in driving change in the sector.
Mobile banking applications have become increasingly important and have even spurred the inception of neobanks. These banks offer streamlined services only via their websites or applications. Examples of neobanks include PayPal, Chime, and Varo.
Payments
Payment APIs connect ecommerce platforms, payment processors, payment gateways, and other applications. These interfaces ensure that a merchant is able to process credit cards and other popular payment methods quickly and efficiently.
Pay.com has a powerful payment API that makes it easy to integrate our platform into your existing web- or app-based payment system in a way that works for your business. What’s more, it enables speedier transactions with a variety of payment methods to reduce friction at checkout.
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Security
Security features like tokenization reduce the likelihood that cybercriminals can access customers’ credit card details. Multi-factor authentication, on the other hand, confirms customers’ identities. These are two of the most popular uses for fintech APIs.
Pay.com’s payment API is embedded with 3D Secure 2.0 (3DS2), which requires customers to enter additional information via their banking application to validate a transaction. If a transaction is flagged as potentially fraudulent, a shopper will be required to provide biometric or other information before it can be processed.
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Cryptocurrencies
Built on blockchain technology, which stores and shares transaction information, the level of convenience and security that cryptocurrencies provide has seen them steadily grow in popularity over the past few years.
While blockchain can be used to easily verify and approve transactions, it’s challenging to build this technology from scratch. An API allows you to harness the power of blockchain and start accepting cryptocurrencies as a form of payment with minimal lines of code.
The Pros and Cons of Using Fintech APIs
It’s likely already clear that fintech APIs are powerful tools that businesses can use to easily enhance the capabilities of their existing applications or websites. However, there’s plenty more that this technology can do – and a few potential challenges that these programs bring.
Fintech API Benefits
- Quicker development: Fintech APIs reduce the need for developers to write code from scratch, minimizing the time it takes to get to market.
- Reduced costs: With simpler, speedier development, you’ll also reduce the investment needed to get an application up and running.
- Improved customer experience: The building blocks that a fintech API provides ensure standardized user journeys that are easy to follow and understood by customers.
- Embedded security: Developers can leverage existing security infrastructure to reduce the likelihood of fraudulent transactions and the burden of compliance.
Fintech API Challenges
- Incompatibility: Many legacy banks have systems that aren’t designed to work with APIs, which reduces these programs’ functionality and usefulness.
- Regulatory hurdles: Banks, merchants, and other entities that use fintech APIs must comply with certain regulations. However, not all APIs adhere to these laws.
- Quality: The fast pace of the fintech industry means that some APIs are designed on the fly and may not perform optimally.
- Security: Unsecure connections between programs or flawed security protocols within an API are a major cause for concern around potential data breaches.
Why Choose Pay.com as Your Payment Service Provider?
Pay.com has a robust, modular payment API that you can easily customize to suit your business’s unique needs. Developers can easily select which resources to add to your website or app to balance functionality and performance. Plus, you can scale your payment system as your business grows.
In addition to flexibility, our full-service payment infrastructure allows you to accept a wide variety of payment methods. Whether your customers prefer to use credit or debit cards, digital wallets, ACH transfers, or other alternative payment methods, you can start accepting them in just a few clicks via the Pay Dashboard.
What’s more, Pay.com’s session-driven API means that recognized users don’t need to log in every time they interact with your brand. This further reduces friction, improves the user experience, and lessens the chance of cart abandonment.
Last, but certainly not least, our API features embedded security features that protect you and your customers from fraud and other cybercrimes.
All credit card details are tokenized in transit and we have Level 1 PCI DSS compliance (the gold standard in online security). We also use 3DS2, which requires customers to authenticate transactions via their banking app to prevent fraudulent purchases from being processed.
Rather than having to spend time writing new security code, developers can easily incorporate these measures into your website. Plus, you don’t have to jump through any hoops with the Payment Card Industry Security Standards Council because we’ve already taken care of compliance for you.
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The Bottom Line
Customers are constantly looking for more convenient ways to manage their money and execute transactions. The easiest way for businesses to facilitate these activities is to use fintech APIs.
APIs allow you to customize your payment system and increase the ease with which customers can pay for goods on merchant sites. Plus, they make creating financial applications and services faster and more cost effective than ever before.
With Pay.com, you get a flexible payment API that offers a wide variety of payment methods, speedy transaction processing, and strong security measures. All of this facilitates a top-tier customer experience that will help to ensure your business grows from strength to strength.
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