What are APIs and how do they work?
According to How Stuff Works, “An application-programming interface (API) is a set of programming instructions and standards for accessing a Web-based software application or Web tool. A software company releases its API to the public so that other software developers can design products that are powered by its service.”
Essentially, an API is a type of virtual language that different systems or machines can use to communicate with each other.
One of the best ways I have seen this relationship explained comes from Timothy Choi’s Medium article, “How APIs work — An Analogy For Dummies”. Mr. Choi compares APIs to depositing cash at a bank. Choi explains that if you wanted to deposit cash, you could walk into the bank, crank open the vault, leave your money and write a note in the ledger that detailed the deposit. However, not everyone is strong enough to open a bank vault alone, and some people could take advantage of the setup. So instead you find a teller that is both strong enough to open the door and trustworthy enough to act as an intermediary. The teller serves the same purpose as APIs in this case, making the exchange easier on both parties.
While API technology is not a new concept, US banks have recently begun opening up APIs, allowing businesses to connect to their cash data, and making it possible for customers to share their bank data with 3rd party apps, like Trovata.
Application of open banking APIs:
“In the US and Asia, open banking typically refers to a broad set of API-based connectivity that allows greater sharing of account and balance information. The most common application of open banking is account aggregation via API where providers give their clients access to accounts held with multiple banks with one simple log-in.” JP Morgan
APIs are the pipeline that allow cash data to be shared in real time. Consumers have had the advantage of banking APIs for a while now, with apps like Mint and Acorns providing real-time cash insights and cash management tools. While the B2B banking sector was trailing behind consumers, open banking has started to gain traction in the US as more and more banks open up access to APIs. These new data pipelines allow for specialized apps to offer services that streamline existing cash management processes.
What can APIs do for business professionals?
Open banking APIs allow third party apps to fill the gap between businesses that want real-time cash data and banks that provide it. Most organizations lack the IT infrastructure and engineering resources required to manage an API connection on their own.
Trovata uses these big data pipelines as a stepping stone to automating cash management processes. Trovata’s API connections don’t just change the way you access your data, they change the way you view it. When all of your data is flowing into one place, it creates a single source of truth for all of your bank data. One log in. One easy to view dashboard.
By leveraging AI and machine learning technology, Trovata automatically standardizes data as it is received so that businesses can view their complete cash position (including foreign accounts) presented in one currency. This data is then stored and can be easily searched using Trovata’s natural language search tools.
This “trove” of historical data is then used by Trovata’s proprietary machine learning algorithms to create custom forecasts and cash reports.
APIs are the key to unlocking a better view of your financial data, as well as increasing the efficiency and accuracy of your cash management processes.
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