The application programming interface, or API banking meaning, is a mechanism for two software systems to communicate with each other while adhering to rules. In API banking India, these two software systems communicate to provide customers with a better banking experience, whether making a purchase on an e-commerce website or asking for a loan through a loan aggregator. Consider the following API banking examples: you’re in the business of providing HRMS software, and you’d like to add the capability of providing a savings account to every employee that joins your customer. You’ll now use banking APIs from a fintech API banking solutions company in India.
The procedure goes like this: a fintech API provider communicates with bank APIs and requests the creation of savings account for a certain employee. After that, the bank creates the savings account and sends it to the fintech API provider. The HRMS software receives this information from the financial API provider.
What are some applications of API banking?
The most common application of API banking services is payment. Banking API is increasingly being used by all digital firms that allow users to pay for items or services within their tech products. Everyone uses payment APIs, whether it’s a cab aggregator like Ola that lets you pay now or later after each ride, a restaurant aggregator like Zomato that lets you pay contactless at
API banking models the restaurant or a loan aggregator that lets you apply for a loan on the platform.
API banking portal models can be divided into three categories, and they’re utilized interchangeably more often than you might think. Examples are open banking, banking as a service (BaaS), and platform banking.
Open Banking: Open Banking is a method in which banks exchange customer data with third-party application developers securely using open APIs. Fintech are often third-party applications, which may or may not be regulated depending on the jurisdiction in which they operate.
Banking as a Service (BaaS): Open Banking and BaaS are not the same things. However, they are frequently confused with one another. Banking as a service (BaaS) is a business model in which licensed banks directly incorporate their digital banking services into non-banking products. This is different from open Banking, wherein banks safely share client data. Businesses can use banking as an API banking service to offer payments, debit cards, credit cards, savings accounts, checking accounts, and other services that are traditionally only available through banks.
Platform banking: Platform banking is a very different story. In some ways, it's the polar opposite of banking as a service. Platform banking involves a bank owning the customer and integrating non-banking services onto its platform. This isn't particularly prevalent right now, but some larger banks have begun to do so. For example, a bank might integrate airline tickets, theatre tickets, and other items into its platform so that users can purchase them directly from their API banking platform.
APIs also let banks interact with major credit card companies, brokerage firms, and other large corporate clients to improve and streamline their customers’ experiences. The ultimate goal is to boost sales and attract new clients while maintaining existing ones.
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