API orchestration technology has been widely used by many tech companies in the latest decade and now getting traction in the financial services industry. What makes it so attractive to digital banks and FinTechs? Well, first of all, it allows almost unlimited opportunities for scaling the business while making it less dependent on partners and suppliers.
Traditional banks it used to take significant resources to introduce new offerings or enter other markets as they had to build all the back office infrastructure. But with the rise of BaaS platforms and other could SaaS systems providing payment services, it became a lot easier for FinTechs to exploit already existing infrastructure in order to scale up their business. Ultimately, many of the new banks have become some sort of marketplaces, combining multiple APIs into a single interface.
This has been already proven in other verticals and become attractive in the financial space, where even incumbent banks are now considering building their API orchestration layers in order to start new products faster and cheaper.
In this article, we will explore the benefits of API orchestration technology and analyze how to build API-first FinTech products.
What Is API Orchestration Technology?
API orchestration technology is a term used to describe the process of managing, controlling and monitoring APIs using a centralized platform. It allows banks and financial institutions to streamline their API operations and access a wide range of benefits, including:
- Easier management and control of APIs
- Enhanced security and fraud protection
- More streamlined and efficient API operations
- Greater insight into API activity and performance
- Improved customer experience
APIs may offer businesses an unlimited potential to grow and sustain different market conditions, but they also need to be intelligently coordinated to provide that seamless, error-free customer experience that will ensure ongoing success. To achieve this, have to launch a dedicated API orchestration layer that ensures all systems communicate with each other in the same language simultaneously. This orchestration layer (or middleware) creates and designs the workflows by coordinating the activities in the data pipeline between data sources and their destinations and automating them where possible.
Whether simple or complex, data exchanges rely on logical workflows to ensure the correct commands are executed where and when they are needed. An orchestration layer coordinates these data exchanges and ensures they are being processed in an error-free way.
What is more important is to distinguish digital banking platforms using an API and API-first software. While it doesn’t look obvious, founders always get confused with the terms ending up with systems strictly linked to a single SaaS/BaaS platworm. API orchestration layer is designed to
- Connect multiple APIs to the core platform at any point of time
- To orchestrate the data exchange between those systems
- Freely enable or disable any of the APIs without affecting the whole system
- Support smart data routing, i.e. engage to multiple APIs providing the same data/service
Those are the key factors to keep in mind when considering building an API-first bank or FinTech business.
Building An API-First Digital Bank
The value of API orchestration technology is huge when considering all of the ways it can be used. For banks and other financial institutions, API orchestration technology makes it possible to manage a wide variety of interactions with customers. It automates the process of integrating with different systems, which can make it easier and faster to bring new products and services to market. And streamlining processes helps to improve efficiency and reduce costs.
Few customers would know just how many APIs are serving their needs in even the simplest of digital contractions, such as hailing a taxi, making an in-store or online payment,s or chatting via WhatsApp. In each of these cases, the customer-facing company satisfies a demand for a particular service by drawing on other companies’ areas of expertise and sharing software services to simplify and enrich the customers’ experiences.
A State of APIs survey found that almost 60% of the 2 200 companies considered participating in the API economy a top priority; of these, 67.1% worked in the financial services industry.
Companies like Revolut, Stripe and Robinhood have highlighted the blue-sky opportunities APIs offer businesses in the financial services sector. But the success of these companies also hinges on their API-first business strategies and other companies looking to unlock the full potential of this powerful bridging technology will need to completely reimagine their businesses rather than introducing APIs in a piecemeal fashion. Benefits include the ability to combine disparate services into a cohesive and extended customer offering in which specialist providers offer the products and services they do best rather than one company trying to do it all. They also offer far more flexibility than the monolithic legacy systems that operate off a cumbersome core technology system, which would need to be overhauled in its entirety to incorporate new products and services. Instead, companies can plug in a new service to meet changing customer demands or internal business needs as and when needed.
API orchestration technology is quickly becoming a necessary solution for modern banking and financial institutions. By automating the process of integrating APIs it eliminates the need for time-consuming, manual tasks. This, in turn, allows banks and financial institutions to focus on more important initiatives and improve their overall efficiency. This tech also helps institutions meet the ever-changing demands of their customers. As consumers become more and more accustomed to instant interactions, personalization and ever-evolving services, institutions need to find ways to speed up their product development processes. Orchestration technology allows them to do just that, by quickly and easily integrating APIs to meet the demands. This not only improves customer satisfaction but also helps banks and financial institutions stay competitive in an increasingly digital world.
Finally, API orchestration technology can reduce the need for human intervention in the data processing. By automating processes, banks can reduce their risk of human error and prevent any potential security threats from occurring. Moreover, automated processes can help to ensure accuracy and consistency when dealing with customer data, which helps to increase customer trust in the bank’s services.
Case Study: How a Bank Leveraged API Orchestration Technology
Let’s take a look at a real-world example to show how API orchestration technology helps building future-proof digital banks. We had a chance to work with one of such products that was essentially started with a partner bank API. The partner bank took care of the compliance, accounts and transactions while the company focused on building great customer service and experience.
However, after less than a year from going live the product stuck and couldn’t grow because of the inability of the partner bank to provide the necessary services; on the other hand, the monolithic architecture and missing banking core didn’t allow the company to introduce one more partner into their ecosystem.
Just like in many other cases, it all ended up with a complete rebuild of the platform using the microservices architecture, full-fledged core and API orchestration tech in order for the company to be able to thrive. The API Orchestration platform enabled the bank to securely connect all applications, services, and users within its environment to create a robust digital infrastructure.
By streamlining the orchestration of its APIs, the bank increased its agility in responding to customer requests and transactions quickly, securely and easily. This increased efficiency ultimately translated into better customer service and faster problem resolution. Plus, it allowed them to create new products and services faster than before.
In a nutshell, API orchestration technology can help financial institutions to manage and streamline their operations, making it easier for them to provide customers with the products and services they need. This can help to improve customer satisfaction levels and encourage more people to use the services of banks and other financial institutions.