Using third-party application programming interfaces and offering their own to the community helps emerging companies become more agile, give their customers added value and innovate through collaboration. They are also a key means of financial services reaching all kinds of platforms
An Internet user does some shopping online. They access a bazaar that they found out about from an advert on social media and use their mouse to take a look around. After filling in a form to register, they fill their basket and easily add their address – the website helps them to auto-complete and validate it. They then go to the virtual checkout, which gives them the option of requesting a loan or completing their purchase via the payment gateway. When everything is ready, the e-commerce site automatically sends them a digital missive to say thank you.
The person doing the shopping doesn’t notice this, but the process was simple because the APIs (application programming interfaces) of companies like Meta (formerly Facebook), Typeform, Google Maps, BBVA, Stripe and Mailchimp were operating behind the scenes of the e-commerce company. By facilitating communication between two apps for the purpose of exchanging messages and data – one opens the door using protocols and functions so that the other can access their information – APIs create endless opportunities to innovate. As a key facet of open banking, according to BBVA Open Innovation they are one of the tech trends for 2022.
Businesses are also aware of their importance – 76% of developers have said that being a part of the API economy is a priority for their organisation and 68% hope to intensify their use this year, according to a RapidAPI survey. The startups that want to achieve that goal and adopt or strengthen their ‘appification’ have several ways of doing so.
In order to get started, “you don’t have to reinvent the wheel, it’s about taking advantage of all the knowledge of the API community”, according to Noelia Martín, consultant in API Management for Paradigma Digital. “The most important thing is for the startup to assess its value offering and which third-party API it can use for whatever is not its core business”, adds Oliver Díaz, BBVA’s Open Banking Global Product Manager.
The thousands of open interfaces that list directories, such as ProgrammableWeb and RapidAPI could be a good place to start. To refine your search, you need to have a clear idea about the purpose of the API, the target audience, and the benefits it can offer.
Fintech startups in Mexico, Colombia and Brazil are also benefiting from the APIs offered by Belvo, which focuses on accelerating open finance in Latin America. Their 150 customers can integrate financial information from banks (BBVA Mexico, for example), tax entities and collaborative economy platforms. “We let them access and interpret end-user data to draw conclusions. If they had to build the entire infrastructure, they’d lose focus”, explains Pablo Viguera, CEO of Belvo. Meanwhile, Paybook and Afterbanks, two startups from the BBVA Open Innovation ecosystem, also offer financial APIs.
Such collaborations can represent new income streams for all those involved, and can help to retain customers by improving their digital experience. “Selling a banking product through a third party is a new business model that benefits the whole chain – bank, company and user”, notes José Luis Navarro, Head of Strategy Open Banking at BBVA. In this vein, BBVA Mexico has partnered with Zolvers, a platform for domestic workers, so that the professionals who are offering their services can open an account and manage their income from the app, something that could contribute to their financial inclusion.
If a startup believes it can offer a differential value by presenting an API on its platform, Paradigma Digital expert Noelia Martín recommends analysing the use case and evaluating which API management tools (Amazon API Gateway, Apigee, Mulesoft, etc.) will streamline their development and allow them to subsequently analyse their impact.
It is crucial to have strong security in place – Gartner predicts that APIs will become the most common attack vector in 2022. “They are a way into your home – when you present them you should follow a zero trust policy and implement end-to-end security mechanisms”, Martín adds. In fact there are already companies that provide specific cyber protection solutions for APIs, such as 42Crunch.
Another point to clarify is how to monetise the interface.
In an increasingly interconnected world, Martín expects that APIs will have an ever more important role to play for startups, and the platforms for managing them will offer more and more opportunities. In the world of finances they will continue to deal with challenges like regulation and implementation, which a Belvo study considers to be the main barriers to open finance.
“APIs and open banking are the means, but the future lies in embedded finance, a world where financial services are integrated into third-party platforms to reach the customer wherever they may be, and where what banks offer is dispersed through partners”, predicts BBVA’s Open Banking Global Product Manager, Oliver Díaz. Alliances between companies, like those that BBVA Open Innovation helps to forge, will promote the pervasiveness of financial services. Often the secret to that will lie in the APIs that support digital products without the user being aware.