Learn why API-led connectivity is the best approach for building an API network with reusable API building blocks.
The Covid-19 pandemic turned “normal” on its head, and this has been especially true for financial institutions (FIs) and payments companies trying to operate with a remote workforce — and remote customers. The pandemic has accelerated the necessity of digital transformation upon FIs and payments companies overnight, requiring the digitization of operations and processes organization-wide. Not only has the pandemic served as a real-life “stress test” for these organizations, but it has doubly proved the necessity for digital transformation across the industry.
What’s more, many of the changes in workforce and customer behaviors are predicted to stick around long after the pandemic crisis ends. According to the J.D. Power 2020 U.S. Retail Banking Satisfaction Study, one-third of retail banking customers say they plan to increase their use of digital banking more permanently. Considering that digital-only customers have lower levels of satisfaction than those that rely on in-person branch visits, FIs and others in the financial services industry have their work cut out in providing superior experiences. Meeting this new set of demands while operating on inefficient legacy systems and processes — and doing it quickly — is a near impossibility. Instead, FIs and payments companies must find ways to lead digital transformation that can be implemented with caution, reduce operational risk, be highly reliable and secure, and efficiently meet evolving customer needs.
API-led connectivity presents a unique solution that enables FIs and payments companies to connect applications, devices, and data with minimal risk. Organizations can leverage APIs as gatekeepers for processes and data by embedding security controls and alerts on resources for certain processes. This allows organizations to quickly and easily identify and resolve any threats or anomalies.
APIs facilitate streamlined, secure mechanisms for third-party applications and collaboration and any necessary data-sharing. APIs enable the sharing of data in a secure, standardized, governed way that can work to an organization's competitive advantage. An API-led connectivity approach facilitates rapid development, sometimes speeding up the process by a factor of three. Rather than starting from scratch, already-tested APIs can facilitate bug-free implementations and reduce time to market. This, in turn, can lower integration costs.
It is easy to point the spotlight at APIs; however, the API in isolation is just a mechanism that veils the connectivity and functionality happening on the back-end. Connectivity, then, is the star of the show, serving to solve orchestration, presentation, and data access.
Instead, larger enterprises can look for connectivity that is built up via multiple API-led connectivity components. These components require an agile and flexible framework that enables them to be structured and ordered into a multi-tier architecture. This framework consists of three layers:
System layer: This layer sits underneath all IT architectures and consists of hard-to-access systems of record. With APIs, users can access these systems and their data without needing to worry about the underlying complexity. System APIs tend to change less frequently and can be governed by central IT to safeguard the underlying systems from any changes.
Process layer: The next layer involves the business processes that mold and interact with data. These must be independent of systems from which data originates as well as the channels through which data is delivered.
Experience layer: This layer is where data consumption can become personalized based on needs. When the same data is utilized across many channels and users and in different formats, experience APIs can easily reconfigure data in the most recognizable format for the intended audience. This removes the need to set up separate point-to-point integrations to deliver data to each channel.
Leveraging API-led connectivity in this way transforms IT into an enabler for business and different units within a business to self-serve. This approach also allows for the maximization of developer productivity as duplicate efforts are eliminated and as developers are able to leverage other developers’ efforts. It also leads to more predictable change. The modularization of integration logic and separation between modules removes the possibility of downstream impacts from minor data changes.
The veil has been lifted on the urgent need for digital transformation. Not only does it ensure relevance, but it allows FIs and payments companies to adapt to quickly evolving customer needs and behaviors. While customer-facing initiatives certainly merit a transformation, leveraging an API-led connectivity approach can also help organizations reframe and improve relationships with vendors, suppliers, and employees via new technologies — technologies that require a forward-thinking, API-led connectivity approach that improves scalability, reliability, and agility.