The role of APIs in the financial sector

The financial system is undergoing important changes mainly motivated by digital transformation. The arrival of new models and technological solutions have allowed the development and consolidation of new players in the ecosystem, which, in turn, has motivated open competition to offer better services and products for the final consumer.

According to the Mexican integrated finance startup Finerio, some sectors, such as fintech, have had exponential growth, while traditional financial institutions have been forced to accelerate their transition to digital banking in order to compete and offer better services and products. to end users. Models such as Open Banking are playing a fundamental role in the redesign of the financial system.

“Open Banking is revolutionizing the financial system and triggering a new era for both companies in the sector and users. This would not be possible without the technological solutions and tools that allow the exchange of data between financial institutions, in this case the bank data aggregation APIs”, says Nick Grassi, Co-CEO of Finerio Connect.

APIs (Application Programming Interface, for its acronym in English), or application programming interface, are a set of protocols and definitions that allow integration and communication between applications and programs, always adhering to a set of rules. These solutions allow the exchange of data in a safe way and without involving third parties.

One of the keys to how APIs work is the ease of integration. These tools have to be simple to integrate with other software so that communications can be successful. Similarly, your updates should not cause conflicts so that your work remains optimal.

In accordance with article 76 of the Fintech Law, all financial entities, be they banks, fintech, credit bureaus, etc., are required to enable APIs for the exchange of information.

Through the Open Banking APIs, companies in the sector can consult the history of credit and debit card transactions, mortgage loans and investments, products contracted by the consumer and account balances, among other aspects.

This allows financial institutions to offer personalized services tailored to their needs, provide users with tools to manage their finances in a better way, as well as being able to review the transactions and balances of all their accounts in the same place.

It should be noted that APIs can only be used internally, so companies have more control over them. This gives companies more control.

open banking

Open banking is a system that allows users to voluntarily share their financial information with a third party in order to access better products and services. Likewise, financial entities, both traditional and digital natives, can capitalize on the information that their users give them, enlarge their client portfolio and increase their profits.

Data from Finerio Connect reveals that 68% of Mexican companies anticipate that Open Banking will promote the growth of the financial sector, 65% that it will generate more varied competition and 92% of companies that associate with Open Banking providers will have more chances of success.

“The open banking revolution would be impossible without bank data aggregation APIs,” they say.

“The solutions offered by this model can be private and public. The former have restricted access and can only be used by members of an organization; in the second case, they allow exchanging data with partners, suppliers, among other actors, for a more efficient integration of services. Finally, public APIs allow data to be shared with anyone, but they tend to have limited access to the information”.

In the specific case of the financial sector and open banking, these interfaces allow a platform to be synchronized and connected to the databases of a financial entity, be it a bank, fintech or other options, to retrieve customer data.

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