APIs (application programming interfaces) enable software applications to communicate with each other. They make it easy to exchange data between systems and build connected ecosystems.
According to a PwC survey, over 75% of banking and capital markets CEOs believe APIs and open banking are the most disruptive forces in financial services today.
APIs present an opportunity for innovation and digital transformation across finance:
API calls in finance increased 125% in 2020. (Source: Google Cloud)
In this guide, we‘ll explore the top API use cases and examples in banking, private equity, insurance, and trading.
But first, let‘s look at why APIs matter in financial services.
Why Are APIs Important for Finance?
Here are some key reasons why finance firms are adopting APIs:
- Access more data sources: Aggregate and analyze data from internal systems, partners, and third-party sources.
- Increase connectivity: Improve integrations between fragmentated legacy systems.
- Enable innovation: Rapidly launch new digital offerings for customers.
- Improve UX: Provide seamless experiences by connecting front and back-end systems.
- Automate processes: Increase efficiency, reduce errors and costs.
- Scale operations: Support growth by easily onboarding partners and third-party developers.
- Meet regulations: Stay compliant as data sharing laws increase.
Many leading financial institutions have seen tangible benefits from implementing APIs:
- BBVA reduced loan approval decisions from days to minutes using APIs.
- Wells Fargo accelerated product development cycles by 50-75% with APIs.
- Capital One saw 20x reuse of API code, reducing costs.
APIs are increasingly critical as finance becomes embedded into more aspects of consumer and business platforms.
Next, let‘s explore top API use cases and examples across banking, private equity, insurance and trading sectors.
1. Banking APIs
Banking APIs enable open banking, increase connectivity, and provide access to bank data and services:
- Open banking – Share customer data securely with third parties to enable innovative services.
- Increase connectivity – Overcome siloed legacy systems and integrate partner ecosystems.
- Banking-as-a-Service – Embed banking functions like payments and lending into other apps.
According to McKinsey, the number of APIs in banking will grow at a 32% CAGR between 2022-2027, doubling in that period.
Let‘s look at examples of banking APIs and their benefits:
BBVA APIs
BBVA, a leading global bank, offers various banking APIs through its open platform, including:
- Loan APIs – Integrate BBVA mortgage and auto loans into a partner website.
- Collections API – Confirm payments in real-time to streamline collections.
- User Information API – Verify customer identity and income digitally.
BBVA APIs follow industry standards like OpenID Connect for security and OAuth 2.0 for authentication.
They allow partners to quickly integrate BBVA‘s products and services into their platforms. As a result, BBVA can reach more customers and increase lending volume.
Plaid APIs
Plaid provides a suite of banking, transactions, and identity APIs.
Key Plaid APIs include:
- Bank Account Information APIs – Link bank accounts to fetch balance, transaction data. Used by 85% of US fintech companies.
- Income and Identity APIs – Verify income, employment, identity details of consumers.
Plaid enables over 5000 fintech and finance apps to easily and securely connect with bank data. It saw 152% transaction volume growth from 2019 to 2020.
As consumers rely more on fintech apps, Plaid plays a crucial role in linking them to banking data.
TrueLayer APIs
TrueLayer offers open banking APIs in the UK, Europe and Australia:
- Account Information APIs – Obtain aggregated view of accounts, transactions, balances.
- Payments APIs – Initiate payments through open banking protocols like SEPA.
- Identity APIs – Verify identity, KYC, source of funds to prevent fraud and financial crime.
TrueLayer handles over 2 billion API calls per year. It allows companies to quickly build fintech apps leveraging open banking data and payments.
As open banking expands globally, TrueLayer provides the connectivity and data access needed to innovate.
2. Private Equity & Venture Capital APIs
For private equity and venture capital firms, APIs enable access to data for analysis and reporting:
- Portfolio data – Holdings, performance metrics, cash flows, valuations.
- Market data – Purchase info, comps, news on target companies.
- Investor data – Capital calls, distributions, reporting.
This data is critical for decisions on new investments, monitoring portfolio health, and reporting to stakeholders.
According to Preqin, 48% of PE firms say data quality is a top priority today. APIs improve access to clean, structured data.
Let‘s look at API examples in private equity:
iCapital Network APIs
iCapital Network provides APIs for wealth managers and banks to integrate alternative investments into their platforms.
Key iCapital APIs include:
- Investment APIs – Enable clients to browse and subscribe to private equity funds.
- Portfolio APIs – Provide portfolio details like NAV, cashflows, ownership %.
- Document APIs – Access legal agreements, capital statements, tax forms.
iCapital processes over $75 billion in transactions annually through its platform. Its APIs are used by over 150 institutions to provide private market access to their high net worth clients.
Moonfare APIs
Moonfare offers a digital platform for investing in top-tier private equity funds.
Moonfare provides an API that allows partners to integrate its investment interface and workflows. This enables other platforms to offer private equity options to their users.
For instance, a robo-advisor could use the API to let clients invest in private equity alongside public stocks and bonds, providing a more diversified portfolio.
3. Insurance APIs
Insurance providers leverage APIs to enable connectivity and data exchange across their ecosystem:
- Integration – Share data seamlessly between core systems, partners, and third-party services.
- Innovation – Quickly launch new digital insurance products, channels and experiences.
- Ecosystems – Exchange data and services with partners via APIs.
According to Deloitte, 67% of insurers identify cloud and API development as a critical capability today.
Let‘s explore API examples in insurance:
Trov APIs
Trov is an insurtech company offering on-demand insurance for specific items like phones, laptops, and cameras.
Trov provides APIs that allow partners to integrate its insurance platform. This enables seamless insurance purchase during checkout on ecommerce sites, for instance.
Key Trov APIs include:
- Quote APIs – Get instant policy pricing and eligibility.
- Issuance APIs – Purchase and manage on-demand insurance.
- Claims APIs – Initiate and track claims digitally.
Partners like Wayfair, Travelocity, and Yamaha use Trov APIs in their platforms to protect customer purchases.
Lemonade APIs
Lemonade is a leading insurtech firm focused on renters and homeowners insurance.
Lemonade offers an Insurance API that enables partners to integrate insurance into their apps and products in a few ways:
- Easy insurance storefront using an embeddable widget.
- Deeper integration via REST APIs.
- White-labeled insurance integrated seamlessly into a third-party platform.
Uses cases include enabling e-commerce companies to offer insurance during checkout, or home security companies to provide home insurance as an add-on.
Lemonade handles over 100 API calls per second, enabling new distribution channels and driving policies.
4. Trading APIs
Trading platforms use APIs to automate and customize trading strategies:
- Automated trading – Execute trades programmatically based on conditions.
- Algorithmic trading – Implement quantitative and rules-based trading strategies.
- Smart order routing – Optimize trade execution across markets.
Per Business Insider, 70% of US stock trades are executed through automation using trading APIs.
Leading examples of trading APIs include:
OANDA APIs
OANDA offers a suite of REST and FIX APIs targeted at brokers, hedge funds, and algorithmic traders.
Key capabilities include:
- Pricing APIs – Get real-time exchange rates and precious metal prices.
- Trading APIs – Submit, modify and cancel orders.
- Position APIs – Get real-time margin utilization and P&L metrics.
Traders globally leverage OANDA to analyze market conditions and automate trading strategies across FX, commodities, indexes, bonds, and stocks from a single account.
Interactive Brokers APIs
Interactive Brokers provides the Trader Workstation (TWS) APIs to automate trading.
With TWS APIs, traders can:
- Stream market data – Receive tick-by-tick data on stocks, options, futures etc.
- Analyze historical data – Backtest strategies with historical ticks, bars, and order book snapshots.
- Build trading algos – Automate rule-based trading 24/7.
The TWS Java, Python, and C++ APIs are used by over 200 institutional trading firms today.
As a former Web scraping expert myself, I‘ve seen that APIs can provide trading algorithms with data more quickly, reliably, and cost-effectively than traditional Web scraping. APIs also enable real-time tick data vs scraping static HTML. With APIs, you avoid issues like changing site layouts that can break scrapers.
Challenges in Adopting Finance APIs
While APIs provide immense opportunities, firms face challenges in leveraging them effectively:
Security Concerns
Financial data is highly sensitive. Security is the top concern when opening up data via APIs, according to Fintech Futures:
Rigorous security testing, controls, and monitoring are essential to prevent fraud or data leaks. Standards like OAuth improve identity and access control.
As an API expert, my recommendation is to implement security upfront in the API design process. Conduct thorough penetration testing and add authentication mechanisms like OAuth 2.0 tokens and API keys. Monitor for suspicious activity and restrict API access to vetted partners.
Lack of Standards
While APIs are ubiquitous, no common standard exists like ISO 20022 in payments. Different vendors use varying API conventions.
This can complicate connecting to multiple providers. It also limits reusability of integrations between financial institutions.
Groups like the Banking Industry Architecture Network (BIAN) aim to develop API standards for interoperability. Adoption of leading practices from BIAN, IFX, SWIFT and others can help.
Third-party aggregation tools and integration platforms smooth out differences between providers for now. Over time, common standards will likely emerge to further accelerate API adoption.
Conclusion
APIs present a huge opportunity for innovation and connectivity across the finance industry. Adoption is accelerating as firms realize the benefits of APIs.
Leading examples illustrate how APIs enable better data access, new business models and user experiences. While security and standards pose challenges, the API potential outweighs these.
Looking ahead, firms that leverage APIs strategically will gain advantages in reaching customers, partners, and markets. For consumers, APIs facilitate the embedding of financial services into more aspects of their digital lives.
As McKinsey predicts, "APIs are poised to have a transformative impact across financial services." Companies should evaluate API opportunities now to boost their strategic positioning and digital capabilities.
