What Is A FinTech API? Complete Guide will be described in this article.
What Is A FinTech API? Complete Guide In 2024
In this article, you can know about What Is A FinTech API here are the details below;
By the end of 2022, Tipalti projects that the value of the global financial sector would reach $26.5 trillion. Unquestionably, the push for digital transformation in businesses and the explosive growth of the global financial sector have contributed to the recent proliferation of FinTech. Traditional financial institutions might go digital by charging subscription fees to third parties for access to their data. Startups now perceive the chance to give users individualised experiences by introducing new features that make use of previously inaccessible institutional data.
What is a FinTech API?
Let’s dissect it. An API stands Application Programming Interface, and the Oxford Dictionary describes FinTech as “computer programmes & other technology used to support or enable banking & monetary services.” Software components can interact and communicate programmatically by adhering to rules defined by APIs. A particular kind of API known as a fintech API enables companies to include banking and financial services elements into their apps.
It’s possible that you have used a FinTech API without realising it. For instance, the app you used to place your order quite likely (almost certainly) used a payment processing API to verify and handle your payment if you ordered takeaway. An additional illustration might be a personal financial app that retrieves account balances and analyses spending via an Open Banking API.
What are BaaS and open banking?
FinTech and Banking as a Service, or the BaaS model, are closely connected concepts. According to the BaaS concept, a BaaS platform makes APIs available so that FinTech companies, online banks, and other suppliers can obtain the data required to include financial elements into their apps. In return for access to the platform’s data and features, the third party pays a charge. Open Banking is the term for this technique.
A FinTech company adds new features “on top” of an established financial institution’s platform after subscribing to a BaaS platform. The integration of financial data from numerous accounts or new banking products are examples of additional functionality.
Financial institutions can make their data accessible using FinTech APIs without disclosing the inner workings of their own systems. The ability of their third-party applications to take advantage of the financial institution’s current security and compliance standards is advantageous to subscribers.
The types of FinTech APIs
Financial services are offered in a wide variety. Thus, there are a tonne of FinTech APIs accessible. Financial data providers/aggregators, payment processors, investment brokers, regulatory tech (RegTech), and KYC (Know Your Customer) APIs are the most popular FinTech API types.
Financial data providers and aggregator APIs
Third-party apps can access financial data from these APIs, such as account statements, transaction history, and client profiles.
Consider data providers to be like conventional banks. You can only access data for that particular bank with traditional banks. APIs are available for almost every bank, including Synchrony, Citibank, Discover, and Wells Fargo.
In contrast, data aggregator APIs offer greater flexibility as they facilitate access to data from multiple banks. Developers can integrate debt management, investing, and personal banking into a single interface by using aggregators. Plaid is among the best aggregators of financial data.
Compared to non-bank aggregators, financial data providers have fewer use cases because they are restricted to a single bank. On the other hand, data providers—traditional banks—are renowned for having strong security.
Payment processor APIs
Among the FinTech API categories with the quickest rate of growth are payment processing APIs. Applications can link to a payment platform through a payment API to validate and handle payments. Instead of having to construct a payment solution yourself, you may utilise these APIs to create an interface with one. Payment processor APIs include those from Stripe, Square, Paypal, and Adyen, as examples.
Security is a major factor in why companies utilise payment processors to handle their transactions. They are able to create apps that use the architecture of an already-existing payment platform to support fraud detection and authentication. Payment APIs are used by businesses because, in the absence of them, companies would have to securely store cardholder data to prevent breaches. Payment Card Enterprise Data Security Standard (PCI) compliance and ongoing PCI security standard maintenance are prerequisites for payment technology. Not to add, P2PE (point-to-point) encryption and tokenization are provided by payment processors.
Investment APIs
Brokerage and stock market APIs are the two main categories of investing APIs.
Let’s talk about brokerage APIs first. Brokerages used to be walled gardens. A third party could not leverage a brokerage’s infrastructure to gain access to user data or develop new features. Financial institutions known as investment brokers use APIs to make their data available to outside apps. Brokers permit applications to purchase and sell stocks on behalf of consumers through APIs. Interactive Brokers and Binance are two instances of brokerage firms that provide APIs.
The stock market API is the next category of investing API. Securities trading is not possible with this kind of API. Rather, the emphasis is on furnishing customers with comprehensive stock data to enable them to make well-informed investing choices. Quotient, Alpha Vantage, and Yahoo Finance are a few examples. Market data for the cryptocurrency industry is provided by CoinAPI.
RegTech APIs
RegTech, or regulatory technology, is technology designed to support businesses in adhering to regulations. RegTech replaced manual processes for regulatory documentation analysis and synthesis into actionable requirements. Increased restrictions, especially in the banking industry where the movement began in 2008 as governments sought to win back the public’s trust, have led to a tremendous growth in RegTech. RegTech is an effort to assist companies in managing their compliance obligations.
Compliance personnel used to have to go through a lot of different regulatory agencies’ regulation documents to keep track of any developments that might have an impact on compliance. The documents contained press announcements, RSS feeds for every regulatory website, and regulatory websites themselves. To comply with the new laws, compliance personnel had to compile the data into a workable strategy.
RegTech APIs enable developers to create user interfaces that only show pertinent regulatory data to the user. RegTech converts data into actionable compliance duties in addition to enabling the collection of regulatory information. At the core of RegTech and essential to this competence is artificial intelligence (AI). Ascent is a well-known RegTech platform with an AI foundation.
KYC (Know Your Customer) APIs
“Know Your Customer (KYC) standards are designed to protect financial institutions against fraud, corruption, money laundering, and terrorist financing,” claims Swift, a top provider of financial messaging services.
In order to stop fraud and corruption, businesses utilise KYC APIs to confirm user identities, keep an eye on user activity, and confirm payment sources. Features include document verification, digital footprint analysis, and anti-money laundering inspections. Certain APIs, such as those provided by Onfido, allow verification using e-signature, video, and biometric methods.
Advantages of using FinTech APIs
Reduced cost and increased development speed
Because FinTech APIs eliminate the requirement to incorporate financial elements like payment gateways into applications, development costs are decreased and development speed is increased. Alternatively, an API can be used to access the data and capabilities of a BaaS platform. Because you do not need to debug the services provided by BaaS platforms, development speed is also faster.
Improved customer experience
By emphasising the key components that set their apps apart from the competition, API developers may leverage FinTech APIs to enhance the user experience. Rather than starting from scratch, they can add features to an already-existing BaaS platform to give users individualised experiences.
Additionally, read our piece on How to use documentation to create a captivating API developer experience.
Leverage security infrastructure
FinTech APIs let developers take advantage of the security architecture already in place on a BaaS platform. For instance, you can use cardholder data storage, PCI compliance, fraud detection, authentication, and P2PE encryption in the context of payment processor APIs.
Automate compliance
Using RegTech APIs, compliance can be automated. They are able to develop actionable duties tailored to your company by analysing regulatory information from various sources.
Prevent fraud
Know Your Customer, or KYC, APIs are experts at confirming users’ identities to shield financial organisations from fraud and other unlawful activity. They also check identification documents and payment sources.
The Best FinTech Platforms by Use Case
Financial Data Providers and Aggregator APIs
· Plaid API – Best for Connecting Multiple Accounts
A financial data aggregator called Plaid API enables you to link accounts from many financial institutions into a single interface. Using Plaid’s API, you may access financial transactions and account balances, verify users’ identities, and analyse their financial data.
Plaid, as an aggregator, gives you the ability to see trends and acquire insights on the preferences and actions of users. With this information, you can better market, sell, and assist the consumer by developing individualised experiences. One advantage of Plaid is that it offers authentication for all accounts accessible over the platform, just like other aggregators.
· Citibank API – Best bank-specific provider
Instead of acting as an aggregator, the Citibank API provides financial data. Citibank exclusively facilitates transactions pertaining to that bank as a provider. If all you need is access to Citibank clients’ data, Citibank is a solid option.
You can obtain client statements, profile information, and a user’s accounts and transactions with the Citibank API.
Payment Processors Platforms
· Stripe – Best for eCommerce
The payment processor Stripe is the biggest FinTech in the US, with a valuation of $22.5 billion USD, according to the Forbes article “The 11 Biggest Fintech Companies In America 2019”. Stripe primarily concentrates on POS and eCommerce transactions. Stripe functions as a payment gateway in addition to a processor. Also check Apps Like Wombo
Excellent developer resources from Stripe, including as comprehensive documentation, use cases, and coding tutorials, are well-known. Credit and debit card transactions, ACH, Apple Pay, Google Pay, and invoicing are all supported by Stripe. Account routing by currency is also supported.
The fact that Stripe mandates you to use their payment gateway, as opposed to several more flexible payment gateway providers, is a drawback (for some).
· Square – Best full-service Payment Platform
Square’s features make it appropriate for both online and physical stores. Square might be a better option than Stripe if you must support brick and mortar stores.
A variety of APIs are available from Square to access various features on the platform. Despite the platform’s size and complexity, you can use its API explorer to filter by component and locate the necessary APIs.
Square is regarded as a “full service” payment provider that offers more functionality than Stripe. Square offers support for loan processing, marketing, inventory management, loyalty programmes, and more in addition to processing card transactions.
Investment Platforms
· Interactive Brokers – Best full-service brokerage
Through its API, Interactive Brokers is a full-service investing platform that enables you to perform stock buys and sells on behalf of consumers as well as access market data. Interactive Brokers is a wonderful option if you’re searching for a platform that has all of the features of a brokerage.
Brokers that interact
The Trader Workstation (TWS) API and the Client Portal API are Interactive Brokers’ two main APIs. You can trade, keep an eye on, and oversee a user’s IBKR account on their behalf by using the Client Portal API. You may view portfolio performance, manage accounts, automate trading methods, and access market data via the Trader Workstation (TWS) API.
You can create trading apps and software, get securities data, and use IB SmartRoutingSM to find the optimal stock, option, and combination pricing while trading with Interactive Brokers APIs.
· Polygon Stock API – Best rich stock data
Polygon Stock API is a stock market API rather than a full-service brokerage, in contrast to Interactive Brokers. If all you need is high-quality stock data and don’t want to buy and sell stocks, this API is a suitable option.
Nanosecond timestamp data and low latency data APIs are two of Polygon’s main features. Due to its data centres’ connections to the NASDAQ, BATS, NYSE, IEX, and other exchanges, Polygon boasts reduced latency. Polygon claims that because of its connections to the major stock exchanges, it can provide institutional-level data that is inaccessible to the majority of regular traders.
Polygon timestamps data to the millisecond, in contrast to several other stock data suppliers. The timestamping is in milliseconds for several other suppliers. This scale of timestamping makes historical performance analysis more detailed.
· CoinAPI – Best for cryptocurrency market data
One noteworthy source of market data for cryptocurrency marketplaces is CoinAPI.
RegTech KYC
· Ascent: Best for regulatory compliance automation
Ascent wants to use artificial intelligence (AI) to help its clients automate the compliance lifecycle. If you want to use AI to create meaningful compliance duties, Ascent is a fantastic option.
Ascending
Ascent analyses regulatory data that is pertinent to your company to assist you in keeping an eye on changes in regulations. It then condenses the data into responsibilities that your company can really carry out. You can incorporate Ascent’s data insights into your current GRC operations or technologies. After that, you can link Ascent’s data to policies, controls, and procedures in your GRC platform and manage your compliance lifecycle.
· Onfido – Best ID Verification Platform
To verify compliance with the most recent rules, Onfido is a verification platform that can do KYC (Know Your Customer), AML (Anti-Money & the Laundering), and anti-fraud checks. Also check Best Employee Time Tracking Apps
Infido
The collection of more than 2,500 ID document kinds from most nations in the globe is one of Onfido’s features.
Onfido has AI that can approve or deny applications, biometrics, and video verification capabilities.
Conclusion
Because of the financial sector’s explosive growth in recent years, fintech APIs are the type of APIs that are expanding the fastest. By allowing third parties access to their data, legacy banking institutions are growing their present business. FinTech companies are using institutional data that was not previously available to provide new features and client experiences.