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De-jargoned: Application programming interface

LiveMint logoLiveMint 25-06-2017 Vivina Vishwanathan

Every time you open a banking app to send money to your friend, make a bill payment or check your balance, you end up on an application programming interface (API). Though APIs functions in the background, they have a direct implication on how the app or website that you are using would work.

An API is an interface that allows different softwares to interact with each other and share information. Today most of the major banks have multiple apps. At the core of all these apps are APIs, to allow softwares to talk to each other and complete your transactions. In retail banking, there are broadly three types of APIs: private, partner and open, according to a Capgemini report on retail banking. Private APIs are owned by banks and used internally. These are largely used for back-office work, leveraging big data, and maintaining compliance.

In case of partner APIs, a third-party partner is able to link its services with the bank’s app. Through the association, partner APIs allow banks to provide third-party services to their existing customers through their app, for example: the expense tracker services that banks link to their mobile banking apps, making the expense tracker available to you.

Currently, a lot of importance is given to open APIs. As the name suggests, they provide an open architecture, allowing any business to access data and functionality without any association with the API providers.

Of the three types of APIs, open APIs can bring in the most changes in the overall digital ecosystem. Open APIs basically allow data to be accessible to larger institutions. To get a sense of how open APIs can bring in change, we can look at the government’s open API policy for five programmes: Aadhaar, eKYC, eSign, proposed privacy-protected data sharing and the Unified Payments Interface (UPI). Though Aadhaar data is handled by Unique Identification Authority of India (UIDAI) and banks have no control over the data, still banks are able to use the data. For instance, banks use Aadhaar-enabled biometric authentication to open bank accounts. An open API also gives banks the ability to monetise your data. But that doesn't mean all your information is made public. The data exchange in open APIs happens in a controlled manner. However, security does seems to be a concern with open APIs. Hence, not many banks currently offer them. But they are still works in progress and you can’t rule out the possibility that someday, any bank would be able to fetch your data from any bank, of course, with your consent. 

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