The financial industry is increasingly embracing APIs (application programming interfaces) to foster collaboration and meet rising consumer expectations for digital services. By providing third parties access to bank systems through APIs, financial institutions can quickly develop new products and experiences to engage customers in a fragmented marketplace.

APIs act as a bridge between bank networks and external developers. They allow banks to break down siloed legacy systems and securely share select data and capabilities. APIs also enable integrating with fintech apps to deliver smoother customer journeys.

JPMorgan Chase exemplifies this trend. In 2017, the bank launched a platform giving fintechs and corporate partners access to accounts, data analytics, fraud monitoring, and more through hundreds of APIs. By building its large tech stack as API-first, JPMorgan can assemble new products faster for clients.

Citibank has taken a similar open API approach. The bank integrated with budgeting app Mint and robo-advisor Betterment so customers can easily share Citi data and services within those apps. “APIs allow us to meet users where they are,” explained Citi Chief Digital Officer Yolande Piazza.

In payments, Wells Fargo’s Virtual Card Pay API lets corporate treasurers integrate virtual card issuance into business workflows to streamline vendor and supplier relationships. The bank also has payroll APIs that sync into HR and accounting systems like ADP and NetSuite.

Even mid-size regional banks are jumping on board. Silicon Valley Bank rolled out an API portal giving clients access to real-time foreign exchange rates and account services. The bank ties this into relationships with venture capital and private equity funds who need reliable data.

Community banks are also using APIs to level the playing field. Coastal Financial in Washington built a peer-to-peer API network allowing small banks to seamlessly transfer funds and share services. Branded API Store and Exchange (ABASE), this platform democratizes access to modern systems.

On the startup side, Plaid has become a fintech unicorn by providing APIs allowing apps like Acorns and Venmo to securely connect with consumer banks. The company was acquired by Visa for $5.3 billion in 2020 based on the value its API platform brings to fintech ecosystem growth.

Symbiotic API relationships like Plaid help developers serve customers without reinventing complex financial infrastructures. Similarly, banks avoid unnecessary risks by utilizing fintech APIs for security, compliance, and analytics rather than building from scratch.

“Done right, APIs create a win-win integration layer bridging banks and disruptors,” said Kasey Tressler, Bain & Company financial services partner. “APIs enable collaboration at scale.”

However, banks must still focus on smooth UI/UX design given customers engage directly with external apps, not the underlying APIs. “Simply opening infrastructure doesn’t guarantee sticky engagement if the experience is confusing,” cautioned McKinsey principal Yobie Benjamin.

Cybersecurity also remains paramount when providing external data access, requiring robust API protocols and traffic monitoring. “Security can’t be sacrificed for speed,” noted Yolande Piazza. “Trust is still our most important currency.”

In total, APIs present a bridge to innovation for incumbent banks while fintechs gain distribution. JPMorgan’s revenues from API partnerships topped $1 billion in 2021, showcasing the model’s potential. With APIs fostering collaboration and efficiency across the finance ecosystem, consumers ultimately win through enhanced services.

“APIs are rapidly becoming the connective tissue linking banks with partners and customers in real-time,” said Wells Fargo head of open banking Guy Chiarello. “This technology will be a critical driver of innovation and competition in the new era of connected finance.”

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