Every enterprise and mid-market company in the world is trying to become more digital. Businesses are moving to the cloud, working with third-party software companies, and looking to improve their banking experience through seamless integration software. A 2022 Rapid API report found that application programming interfaces (APIs) are essential to 98% of organizations’ digital transformation strategies, but 95% are facing the difficult challenge of managing API tooling, security, and governance. These challenges are especially evident for financial institutions, whose outdated legacy systems make it difficult to rapidly deliver new experiences and keep up with the latest trends in payment security. If businesses want to embrace digital transformation, especially in their finance departments, they need to look no further than their banks to offer these new embedded banking experiences. 

So, how can banks develop an API strategy that caters towards the digitization and customization of the user experience as well as create and optimize a seamless embedded banking experience?

APIs

An API is a set of protocols and codes used to build and direct communication between application software. A good API will make it easier for financial institutions (FIs) to develop new products and services by providing the essential programming building blocks. Essentially, APIs are the key to improved customer experiences by allowing for increased visibility and control for the user. In the article, “The Most Important Use of APIs,” FISPAN’s Senior Vice President of Strategic Initiatives, Arsenii Kostenko, describes APIs as an app feature that allows new properties to be added to the existing application without having to ask the vendor to implement them.

“Smartphones have GPS chips and also have a feature (API) to access GPS data. If it didn't have GPS API, there would be no Uber, Yelp, or Tinder (or they would have had to spend years building the hardware and data services that they leverage to create value).” -Arsenii Kostenko, FISPAN’s Senior Vice President, Strategic Initiatives

McKinsey describes APIs as the connective tissue linking ecosystems of technologies and organizations, where “APIs allow businesses to monetize data, forge profitable partnerships, and open new pathways for innovation and growth.”

How Companies Can Leverage APIs to Offer Better Business Banking Experiences

While many banks are increasing the focus on their digital presence, they also must consider optimizing the best customer experience outside the development of run-of-the-mill APIs. For instance, most banks display the day’s posted mortgage rate, where their ATMs are located, or the best rewards cards a customer can choose. While the data that populates these pages is pulled in via an API, and are certainly beneficial use cases, no one would ever consider these game-changing applications. 

Yet, there are many ways that APIs can create a notably better user experience; this is especially true when it comes to business banking clients. Take international wire transfers for example, which is a process that is far more complicated than many business owners appreciate. If a program makes use of APIs, it can track this entire process seamlessly and efficiently. 

FISPAN, for one, has developed a platform for Sage Intacct users that allows clients to view their transfer status at all points of the payables journey. It will also flag if there’s a problem that needs to be fixed for a single payment, rather than an “error” that is indicated for the entire batch file—which leaves frustrated users having to start the process all over again. If a vendor is not properly set up to receive a transfer, Sage Intacct is able to immediately notify the user, thanks to the many APIs operating in the background. If the transfer were to fail somewhere along the way, or the international bank in question added a $20 fee to its transaction, the system will even report and share this information too.

In a recent conversation on the If I Ran the Bank Podcast, Dave Pike, Head of Strategic Architecture at ANZ, discussed how catering to the customer experience is beneficial for the bank. More importantly, he suggested how they can do it:

1. Identify what accounting software or ERPs your business clients are using or planning on using, and target the top five systems for integration.
   
   
2. Identify your client’s specific pain points around secure controls, accounts payable (AP), accounts receivable (AR), payroll, collecting money from consumers, and disbursements to consumers. Then, determine how your products can be embedded directly into those processes and solutions.
   
   
3. Integration is where it becomes tricky. You can build, buy, or partner. Your bank can build APIs into your system and determine how to distribute. You can look to cloud and ERP providers to help you distribute, or you can find a partner who both builds and distributes your APIs and products for you. 

Every bank already has a mobile app for personal banking, effectively making banking more convenient, accessible, and streamlined. Instead of cashing a cheque at your local branch, now you can just scan photos with your phone and submit it directly within the app. With the bank in your pocket, FIs have energetically brought their banking products and services directly to their consumers. It’s time for them to do the same with their commercial clients; except, they don’t live on their phone, but rather their work computers, and more specifically, their accounting software. APIs are crucial for your banking team to create these digitized, customizable commercial banking experiences. You can create products and streamline the processes that meet your corporate clients right where they live: in their accounting systems.

Best Practices for API Development

While some banks understand the value of APIs, many others are implementing them because they think they have to. They view the creation of the API as the objective in itself, rather than taking into account the user, which is often another developer or, ultimately, a client. This type of mindset doesn’t consider that person’s intentions or goals, or what they might want to do with the API. Banks should also make their APIs easier for outside developers to work with so that they can more easily integrate bank offerings or information into the programs they’re developing. That means adding in resources or clickable demos. 

At the same time, many financial institutions, as evidenced by the McKinsey study, are building APIs for themselves — to help them do something more efficiently on their end — rather than for the client, who wants a more enhanced banking experience. Many also make the mistake of creating an API for something that already works without one. 

One of the problems is that banks aren’t set up to create APIs in an efficient way, especially since they’re working with legacy systems. Yet, for them to move into a more digital age, creating APIs is a must. Banks don’t have to do it themselves, though. There are FinTechs, like FISPAN, who can develop APIs that speak to the programs their customers are using, and they can create them quickly.

The three current trends driving digital innovation in corporate banking are the rise of omnichannel banking, challenger banks growing in new niches, and FinTech companies offering their own banking services. The common denominator between all three is that they’re powered by treasury APIs.

How does a bank prepare for these trends?

• Identify the developer audience and distribution channel
• Determine a monetization strategy
• Consider build and deployment options
• Think about the developer experience that your audience needs

Ultimately, any product or service that a bank offers should come with a publicly consumable API. The ones that do this right will be better positioned to improve their operations, including the use of automation and robotics, and they’ll create better user experiences. One place banks can start is by writing down a list of all the products and service offerings that generate the highest revenue and then work down that list to see how APIs can create a better experience in those areas. 

In any case, it’s time for banks to take APIs more seriously, because the ones that do will be the ones who will thrive in the future.

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To learn more about how FISPAN uses APIs to create two-way connectivity between banks and ERPs and accounting systems, schedule a demo with us today.