API Banking: How to Implement It with a FinTech Client Example

Wherever we look, we can find APIs. For example, a restaurant website might have embedded Google Maps so you know where to find it. This is done using an API. If you are reading an article and see tweets with additional information, that is also done via API.

But the real revolution is coming with API Banking. With it, banks can provide their clients with a better digital experience while ensuring complete security of their data. Moreover, API access now allows them to work together with fintech companies and, for example, embed their banking APIs into non-financial applications. 

Thus, having an Open Banking API increases the bank's attractiveness and allows it to quickly respond to changing customer demands. But what is it and how does it work? 

What is API Banking and How Does It Work

Essentially, an API (Application Programming Interface) is an interface that allows you to synchronize, link, and connect a service's database with any application. One could say they serve as a bridge between the application and the service, ensuring secure data transfer without involving third parties.

API Banking refers to a set of protocols that make a bank's services available to third-party companies via APIs. Thus, banks and third-party companies can combine their offerings and provide customers with a much wider range of services than they would otherwise.

One of the most common examples of API use in banking is creating a mobile banking application for customers. Such apps allow customers to check account balances, transfer money, pay bills, and much more directly from their phone. Additionally, through these apps, customers can track their expenses, manage their budget, find new ways to save, or purchase additional services offered by third-party companies.

Benefits of Using API Banking

In 2023, 47% of banks and credit unions (CUs) invested in or developed APIs, compared to 35% in 2019. Another 25% plan to invest in this technology in 2024. But what makes banking APIs so attractive?

Perhaps the most obvious advantage is that APIs make it easier for banks and other financial institutions to exchange data, integrate with systems, personalize their services, or add new services to their offerings. So now, when data transparency and ease of sharing between parties are crucial, banking APIs enable companies to do just that, while also enhancing internal security (all banking APIs must meet strict compliance and security requirements).

But there are several more benefits: the vast amount of data that an API can collect and store can become a goldmine for banks and help them tailor their services to customer expectations. The more personalized the products and services, the fewer customers turn to your competitors. And since data collection is automated, you no longer need to spend time manually managing this data. 

Collaboration with other banks and third-party organizations can also be incredibly beneficial. By gaining access to user data from other participating financial institutions (particularly other banks), banks can promote their products and services to a much wider audience. This opens up broad opportunities for banks to develop their own financial services based on integration.

Besides being very useful for businesses, APIs are also very convenient for consumers. Using apps saves time on transactions, provides instant access to any service or product a consumer might need, and helps them manage their finances. 

These apps have also reduced many administrative barriers for customers, such as paperwork required for loan applications or credit checks, making banking services more accessible than ever. The ability to access other necessary services (e.g., insurance) directly from the app also saves customers a lot of time—they don't need to search for a provider; they can get a tailored offer right from the app.  

Given all these benefits, is it any wonder that, according to expert forecasts, the global Open Banking market will reach 4.3 trillion rubles by 2026? 

How We Do It: API Banking x TMS

So, what does creating such an API look like? We could go through the theoretical steps of building it, but instead we'll show an example of how we built an online currency exchange API for TMS Brokers.

What Was the Project About?

TMS wanted to improve its online virtual currency exchange platform by adding new features for users, such as new transaction types and authorization methods. It was especially important to improve the registration and exchange processing.

What Was the Task?

The project involved expanding the functionality of the user dashboard and other elements of the exchange platform. The main goal was to simplify and automate the currency exchange process for users and provide them with new types of transactions.

What Was the Result?

We added new features for individuals and legal entities, including:

• New transaction types (SPOT+ and NETTO) 
• Extended admin panel
• Bank integration (PKO BP, Alior, Santander) 
• Account deposit option, 
• SMS authorization for critical actions,
• Account sharing and role assignment for individual users,
• Widget allowing pair