An application programming interface (API) allows two software programs to talk to each other. Open APIs go a step further. They permit one business to seamlessly use the data and resources of another to create new services, just as ride hailing apps used by millions every day rely on APIs to integrate with map and payment services. In the financial sector, APIs make it easier for fintechs and other innovators to build solutions -- everything from goal-based savings apps to pay-as-you-go solar solutions -- that leverage the data and capabilities of large financial services providers.
CGAP is working to enable smaller, more nimble innovators to use open APIs to expand the range of useful financial services available to low-income customers, benefiting financial services providers, third-party developers and customers alike. However, opening APIs is not a proven strategy for providers - there are risks and unknowns. Our research focuses on best practices in open API strategy for financial inclusion and product and risk management.
Do open APIs make sense for your company? Which ones? Following these five steps can help you get your API strategy off the ground.
Many products and services as we know them, such as Facebook, would not be possible without something that few people have heard of: application programming interfaces (APIs). Open APIs are contracts that make it possible for different companies' software programs to interact