Why Banks Need API Management
As financial institutions increasingly rely on fintech, they must properly manage their application programming interfaces to optimize IT resources.
In the financial world, there has been talk for years about the importance of leveraging application programming interfaces (APIs) to improve interactions between different digital resources. Yet, for many institutions, it took the COVID-19 pandemic to put this advice into action.
With bank employees using more tech tools than ever to do their jobs, and often from home, banks needed to facilitate better application integration. Now that financial institutions are using more APIs, they must implement effective API management tools, practices and services to continue to improve their digital environments.
Additional Apps Call for Increased Security and Compliance
More apps talking to each other means more data flowing back and forth, accessible by more people in more locations. This presents potential problems for data security and regulatory compliance, especially in a highly sensitive and strictly regulated field like finance. Proper API management can help ensure that institutions follow the principle of least privilege, only granting data access to users who both need it and have the right to it.
Among the security and compliance concerns that financial institutions should address via API management are:
- How to protect information assets from abuse or attack
- How to deliver APIs reliably with no downtime that will negatively impact users
- How to govern API access in a way that is consistent and policy-driven
Financial Institutions Need Flexibility to Enable Hybrid Work
In the early days of the pandemic, many leaders at financial institutions found themselves asking whether they could maintain operations as the world around them shut down.
In many cases, the answer ended up being, “Yes, but …” As in, yes, banks were able to keep going via a mix of in-person and remote work, but the experience wasn’t always optimal. Improved API management gives financial institutions the agility and flexibility to rapidly adapt to changing conditions.
Apps Can Provide Better Support for Customers and Employees
API management tools and practices can help to provide better support for both internal users and external customers. API management is important for enabling remote work for contact center employees, for example.
Solid API management also increases the breadth of products and services that financial institutions can offer. Not all banks allow customers to open savings accounts online, for instance, in part because they lack the necessary APIs and API management tools. Similarly, financial institutions need effective API management to offer online loan processing, loan origination and other financial products that have historically been offered only at physical branch locations.
Gaining a Competitive Edge Through App Development
New services attract new customers. This is especially important for smaller banks, which sometimes struggle to compete against larger financial institutions with the capacity to offer customers a wider range of services across larger geographical areas.
The pandemic showed us just how much of the financial world can operate remotely and online, potentially putting smaller institutions on something approaching equal footing with their larger peers. By embracing API management, financial institutions of all sizes can provide customers with the financial products they want and need, allowing them to survive — and thrive — in a highly competitive marketplace.
Story by Scott Hiemstra
