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Why Fintech Companies Must Collaborate via APIs


If you’re a decision maker at a fintech company, you likely have a long list of ideas for the apps you’d like to build. You also likely understand how difficult it can be to make those ideas a reality. Not only do you have to deal with legacy software, outmoded protocols, and messy data — you have to do all of that within the confines of an industry rife with regulation and red tape.

Generally, there are two paths forward. You can build your entire app from scratch, or you can collaborate with other fintech companies to implement a collection of application programmable interfaces (APIs). While each option has its advantages and disadvantages, the future of fintech is clearly centered in the collaborative use of APIs.

Let’s look at why that is.

1. APIs let you focus on what you do well

Painters don’t want to spend time creating paint and brushes from their rudimentary components, construction workers don’t want to cut down trees for boards or melt metal for nails, and concert pianists don’t want to gather strings, hammers, ivory, or wood to build their own pianos.

In the same way, developers don’t want to write code that has already been written — especially when it has already been written well.

APIs allow your team to take what another team has spent five years working on and build something off of that foundation within weeks. They free up your team to focus exclusively on what you do well, without the headache of maintaining solutions that are already in place.

2. APIs save you time (and money)

How long does it take a dozen developers to build and maintain a solid account aggregation service? How about a service that cleanses and categorizes transaction data? Or a feature that transfers money across accounts?

Any product manager in financial services knows it’s easy to underestimate the time it takes to get these features right. Account connections break, categorization algorithms need revision, and payments are consistently complicated. By using APIs for these services, you don’t have to worry about the inevitable problems that come with building and maintaining the associated code. This means that your developers end up saving tremendous amounts of time in the long run.

3. APIs are flexible

Unlike buying software straight out of the box, with everything pre-formulated and pre-defined, APIs give you the flexibility to select the features you want to include and cut the ones you don’t. Think of all the various ways that Google Maps APIs are used, in everything from biking apps to banking apps. The basic components are the same, but the API allows those components to be integrated in ways that are endlessly flexible.

In this way, you can maintain your own creative license on your projects without having to do quite so much groundwork and heavy lifting.

The Future of Fintech and Banking

The great advantages of traditional financial institutions are that 1) they’ve had a long time to build an enormous customer base and 2) they’ve developed a wide array of products — everything from insurance to deposit accounts to auto loans.

Fintech companies know that they can’t compete on these grounds. There’s just too much to have to create from scratch.

However, with a combination of APIs, fintech companies don’t have to start from square one. They can quickly create something new and useful to the industry. They can mix and match a variety of ideas, add their own specialty, and proceed to change the industry in a way that best suites them. By collaborating in this way, fintech companies will revolutionize financial services.

Topics: fintech