The ecosystems across industries and verticals have become highly volatile and fast-paced. The impact is evident in consumer behaviours, as well. There has been a huge shift in the borrowing behavior, especially, post-covid, for instance. It is common to see customers borrowing for daily groceries, utilities as well as apparels, and credit is no longer confined to assets or high-value purchases. In tandem, lending has undergone a change, and financial institutions are all caught up delivering better experiences to every customer in this sphere.
This conundrum has brought APIs (Application Programming Interfaces) at the center of the lending ecosystems. APIs in lending promise to create and deliver better, instant solutions to a hurried customer. They also serve as a facilitator finding personalized solutions, while generating bundles of user-generated data for the businesses to decode and leverage.
As a result of COVID-19, lenders have shifted their focus to digital transformation. They are in a spree to transform their legacy and silo systems. Financial services providers, meanwhile, are fast building up seamless and contactless borrowing experiences for their clients.
Due to this rapid pace of digitalization in all aspects of life, lending institutions and financial service providers are faced with the challenge of providing seamless and enriched consumer experiences, however. APIs play a critical role here in the modern post-covid ecosystems by helping businesses become a lot more connected – timelessly.
A lender can now enrich the customer profile with data from multiple sources in order to make accurate decisions by gaining a holistic understanding of the customer’s financial status. In addition, financial institutions can use APIs to develop innovative banking products and services, which will contribute to a sustainable future.
Financial institutions can respond to evolving customer needs by integrating APIs into their digital banking products and services. APIs allow mobile check deposits, bill payments, and money transfers between accounts as part of digital banking. Lenders can benefit from APIs in the following ways.
The API allows lenders to access data from any third party, including government and non-government agencies, in order to make a quick decision regarding a loan application. APIs do not contain any data, so they are 100 percent secure and safe.
By utilizing APIs, lenders and financial institutions can integrate third-party vendors that have a good fit with their business model in comparison to the options provided by digital banking vendors.
Financial institutions can integrate APIs with services that will streamline the digital lending process. In this way, borrowers’ driver licenses and mobile phones can be integrated to provide pre-filled information to the lenders.
APIs allow workflow automation, which is a benefit of using them. As automation increases, fewer errors are made, monetary costs are reduced, and operations are more seamless. In order to fulfill your complex reporting requirements, APIs can be used to execute programs, collect data, and transmit data.
APIs are based on authentication and authorization, which can help you understand how they work and why some connections are approved and others are denied:
A connection attempt’s credentials are verified during authentication. During this process, credentials are sent from the remote access client to the remote access server either in plaintext form or encrypted form using an authentication protocol. Authentication is the process of determining whether a connection attempt is valid. Once authentication is successful, authorization occurs. Authorization, then, is asking if you have access to a resource. Authentication simply states that you are who you say you are.
Hence, authentication is important in maintaining security and validation whereas authorization gives the permission to have an access to the resource.