API Banking: A Revolution in the Banking Industry

API Banking - neo banking aka digital banking

Ever ordered food online? If yes, have you wondered how you were able to pay without leaving the application? Well, it’s because of an innovative technology called API Banking. It helps to connect the bank services with the third-party app.

Want to know more about it? Here you go. 

Table of Contents

  1. What is API Banking?
  2. How Does It Work?
  3. Why use API Banking?
  4. Some Popular Uses
  5. Final Thoughts

What is API Banking?

Before knowing about API Banking, you should have a clear idea about API first.

Application Programming Interface (API) means a technical interface between software programs. Sounds complex, right? In simple words, it is software that acts as an intermediary between two software. Or you can say that it allows two software to communicate with each other.

Like Open Banking, API Banking is a set of protocols that facilitates the availability of bank services to third-party companies. It acts as a bridge between them. And is a win-win situation for all the parties. The banks and the applications can provide better services to the customer. And the customer has a superior experience while using them.

How Does It Work?

Thanks to API Banking, you can synchronize your bank account with third-party apps. It is the key to upgrade financial products. The working process is easy-peasy.

The app develops innovative products. But it requires the services of the bank. The bank allows the app to access services, make transfers, and whatnot! And API Banking becomes a medium to integrate the services.

Why Use API Banking?

Earlier, the banks’ services were limited to specific areas. But API banking introduced us to a whole new world of banking. You can also conclude that it has disrupted the industry.

Why, you ask? Here are some of the benefits:

Availability of Financial Information

Earlier, we had to visit the bank to get our passbook updated. It was the only way to know about the bank balance and the transactions we did.

Not anymore. Thanks to API Banking, you can get real-time information about cash flows, cash position, and many more. It helps you to make informed and data-driven financial decisions efficiently and improves the performance of the business.

Ease of Business

Since the introduction of Make in India, ease of doing business has been in the spotlight. But how can we do it without the banking facilities?

API banking has made it possible. Now you can apply for a loan in 5 minutes only. The loan gets processed in the blink of an eye. Also, you can check your credit score. All of this has reduced the administrative compliances and helped in ease of doing business.

Better Customer Experience

The quality of banking services has improved significantly. It is only possible due to API Banking. Without it, we would have been stuck in the traditional banking system forever.

The integration of banking services with third-party apps has led to the birth of a plethora of financial services. They have brought the customer experience to the next level. 


Due to API Banking, you can exchange data through encryption. It is a safe medium to integrate the data. So, there are negligible chances of data leaks or any other cyber threat.

Some Popular Uses

API Banking is present in fields you can’t even imagine. Here are some of the most popular uses:

Core Banking API

They provide core banking services like opening bank accounts, making deposits and payments, and other services. E.g., A business may use it to open bank accounts of its employees via third-party apps. You can make any payment. Be it B2B, B2C, C2B, and P2P. What’s more, you can even make international payments.


Finance is the lifeblood of the business. Just like a person, a company also requires funds for various purposes. And taking a loan is an economical and convenient way of arranging funds. But what will be the point of taking a loan if the bank didn’t sanction it at the right time?

That was the scenario of the past because API Banking took care of it as well. Now, you can get a loan instantly. The application process is even quicker than making instant noodles. Also, you don’t have to go outside. You can get a loan while sitting at home. You can even check your credit score to know whether you are eligible to take a loan or not.


Gone are the days when people used to visit a store. Now they can shop anywhere, anytime. Technology has come a long way. Due to the pandemic, the popularity of E-Commerce has increased even further. An e-commerce company makes thousands of transactions every day!

So, they require lightning-fast payment processing and refund software. To achieve this, the companies make use of API Banking. With new-gen technologies, these companies can do so and provide a better customer experience.

Managing Expenses

Through Card Issuance APIs, you can create physical and virtual cards. They help to manage your expenses, as you can automate the payment process. The process is more secure and convenient. Virtual cards have no scope of cloning due to strong encryption.

It also minimizes human intervention in the complete process. So, the chances of fraud are close to zero. What’s more, you can even set limits and controls to maximize security.

Final Thoughts

The traditional banks were good in their way. But the use of API Banking has changed the entire banking industry. Now a bank provides services way beyond the conventional services of making deposits and payments.

It has many benefits. So, it has become popular among the masses, especially among the millennials and the Gen-Z. The majority of us use it even without being aware of it.

So, you can measure the immense potential it holds. There’s no doubt that it is the future of the banking industry.

By Prasuk Jain

I am an inquisitive and tenacious person with a mix of enthusiasm and a positive attitude, currently pursuing CA.