OPEN APIs Benefits, Development and What to Look For in Your Community Bank’s Hosting Provider By Daren Fankhauser, SVP, Chief Development Officer & Chief Architect, Data Center, Inc. Open APIs: A Breakdown In today’s rapidly evolving fintech market, Open APIs serve as a transformative force for community banks. Offering new opportunities for expanded digital capabilities, Open APIs lead to enhanced services for consumers (like remote account opening or the management of mobile transactions) and increased profitability for financial institutions. So, what exactly is this magical piece of banking technology? API stands for Application Program Interface and serves as a connection between a thirdparty application and a bank. By making the tools and services of a bank available to a third party, (like Chime or Acorns, for example), both entities benefit from enhanced digital solutions and specialties. Open APIs work similarly but go a step further in allowing third parties to access the data of banking customers. This data can include the account holder’s name, account type, transaction details, etc. As sensitive as this data is, when handled with care, the sharing of customer information leads to the improved relevance and convenience of banking services. For customers, this can look like customized investment plans, real-time updates, budgeting assistance and more. For banks, this looks like increased customer satisfaction through competitive, flexible offerings. Built to ensure platform-agnostic operations, Open APIs function compatibly across all systems (whether MacOS, Windows or Linux) and lead to augmented digital services and capabilities. As such, understanding the specific advantages provided by Open APIs and how to ensure your hosting provider optimizes them is crucial to successful open banking. Benefits for Developers In the context of development, the benefits of Open APIs are vast and substantial. Explore said benefits below: I. Self-Documentation • Documentation is built dynamically and remains consistently up-to-date • Commonly deliverable via HTML or PDF • Handy access for Developers (via HTML-based documentation sites) to test API endpoints II. Compatibility • Data format is programming language independent, lightweight • Allows for complex data structures while remaining human-readable • Information is accessible through nearly all devices or platforms III. Accessibility • Readiness via standard web technologies • Straightforward integration process for developers IV. Security Through Strong Controls in Place • Protection via encryption technology • Keys and single-use tokens • Firewalls that increase the detectability of intrusion • Granular security controls that limit entry to required access points V. Functionality • Functionality can be pulled into other applications instead of being trapped into exclusively using the main interface • Access to different sub-areas of the application can be granted without exposing the entire application • For applications written to consume an Open API, a “sandbox” can be used to invoke the API using test data With such value-enhancing benefits riding on the successful utilization of Open APIs, it is paramount for financial institutions to know what to look for in their hosting provider. 20 | The Show-Me Banker Magazine
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