The importance of APIs in digital banking

As the Fintech sector grows and evolves, businesses need to connect and integrate with a wide range of services to innovate. Seamlessly and effortlessly linking with core systems will help organisations in the financial market to remain competitive and disruptive. How do these connections happen? That’s where APIs for banking come into play.

This article covers what you need to know about APIs in the financial market so you don’t get left behind.

What is an API?

An Application Programming Interface, or API for short, is an intermediary software between two applications that allows them to effortlessly talk to each other. You can think of an API as a handshake between two people. The two interfaces are usually categorised as a client and a server, where the client requests information using an API and the server returns the desired response.

APIs can range from simply pulling information from a database to updating and posting new data, along with other more complicated tasks.

APIs are so versatile and pervasive throughout the modern world that you already use them without even knowing. When you check your weather app, financial stocks or order food online, you are using APIs to communicate with different servers, products, and organisations to fulfil a simple request.

For example, when you find a location in any online map program, an API is actioning the map’s server for information that relates to your search input. The server will then send a response back to you with the necessary details and display them clearly and concisely.

What is a banking API?

Banking API is the process of opening banking functions as web service to allow communication between banks and other financial institutions, including Fintechs, to help create a more seamless user experience for their customers. APIs in banking lead to more innovative solutions to financial problems, such as failed payments and non-compliant international payments. By implementing APIs in banking, Fintechs can become highly specialised whilst remaining useful to a broad range of customers.

What are REST APIs and how do they work?

REST APIs work the same as standard APIs described above, as facilitators of communication between a client and server. However, REST, or representational state transfer, refers to a specific set of rules that dictate how web-based applications communicate over the internet. RESTful APIs follow these guidelines to provide flexibility and simplicity for optimisation and scaling processes. As a result, most APIs are considered RESTful as it greatly increases their usability.

For an API to be RESTful, it must adhere to the following criteria:

Client-Server Separation

This constrains the communication between a client device and server – requests can only be made by the client and responses by the server. The client and server are therefore distinct and separate, which allows changes to be made on either application without modifying the other.

Uniform Interface

All requests and responses must follow a common protocol on how to format their messages. This ensures that the client and server correctly understand each other. Otherwise, small discrepancies would result in lost or scrambled data.

The majority of RESTful APIs use HTTP or HTTPS (Hyper-Text Transfer Protocol Secure) as a common language.


This means that every interaction between the client and server must be independent of each other and contain enough information to complete the intended action. Stateless transfers greatly reduce the number of server resources required, as well as the odds of a response failing because the server doesn’t need to retrieve old information to fulfil the interaction.

Layered System

Usually, servers have multiple layers for security, handling data and other important functions. This requires that requests and responses are processed the same way, regardless of the layers they pass through. This means that the server may be restructured easily without affecting data traffic.


This requires some data to be temporarily stored on the client’s device when received. Doing so leads to faster load times when returning data.

An API should send code to clients in its response so they can run it themselves. However, this is not technically part of the REST criteria.

API response and error codes

When an API response is received, status codes will be attached which allow the client to understand more about the data received. These can indicate if the response succeeded (for example, a 2XX code), failed (a 4XX code), or required additional action from the client (a 3XX code), where the latter two digits specify the outcome further.

For more information on the IF API response codes, visit our API documentation.

Banking API use cases

Banking APIs allow for more functionality, as well as help to increase the speed of common operations. As a REST banking example, APIs can improve the process of opening a new bank account by revolutionising KYC processes, and reducing or eliminating the delay between requesting the account and being able to use it. You can also use APIs to easily extract bank transaction details and more notably, aggregate accounts from different financial institutions.

Banking management APIs can also be used to enrich the user experience by offering personal finance or subscription management. Both of these services allow users to see a quick overview of their financial situation and adjust their budget accordingly. Moreover, lenders can use APIs to obtain bank transactions and rapidly gain an overview of an applicant’s credit history to speed up the credit application process. Users can even see what products they are most likely to be approved for.


How to monetise APIs?

Across the digital world, more applications are becoming interlinked by APIs to give the user more functionality. However, not all APIs are created equally and some are more useful than others. This leads to the monetisation of APIs, including the banking APIs described above.

This could be done in several ways. API customers (usually other applications) can pay for access to individual APIs or general access for a monthly subscription. However, some API providers even share revenue with customers by allowing the customer to embed advertising into their application, which is a strong incentive to encourage integration with the provider.

What are the benefits of API banking for developers?

APIs help to improve the user experience and flexibility of Fintech applications, allowing them to quickly access large amounts of data for the user. For example, they can help direct a user to the closest ATM or connect reward schemes. As a result, more users may utilise the application a developer has created.

For developers, APIs allow for creative and robust application development with expanded functionality. The server or client can be changed or updated in any shape or form and the APIs will still work to facilitate clear communication between them. They also allow developers to easily include features from a new application. In a time where a single app can quickly evolve the market, this is key for the developer’s work to remain relevant.

Digital banking APIs that you can bank on

If you are looking to launch your digital banking solution, incorporating existing technology and integrating solutions for complex processes using APIs is a valuable way to optimise development costs and reduce the amount of time it takes to get a product into the hands of customers.

Our Fintech infrastructure APIs help you build the solution that fits your exact customer needs, without huge upfront development.

You will quickly be able to:

  • Connect once and standardise your interaction across multiple banks
  • Make payments, issue bank accounts and perform FX using single workflows
  • Enhance your digital banking offering by adding more providers quickly and easily

You can build a Fintech in weeks, not months. Speak to one of our banking API experts today to request your sandbox environment.

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