The recent regulation of open banking in Nigeria will encourage fintech companies to use APIs and provide seamless customer data integrations. But what are APIs? API which stands for Application Programming Interface is the way for two or more computer programs to communicate with each other or offer a service to other pieces of software.

APIs allow consumers to quickly, easily, and safely authorize sharing of financial data between more financial providers whose products and services can meet their needs. In other words, APIs are the reason behind apps-to-accounts and app-to-app connections, for sharing customer data. They connect various software systems and transmit customer data records for usage across applications.

Classification of APIs

Internal APIs
Internal APIs are used within the same organization. They allow all departments access to all sensitive resources in their software system. The process of linking back-end systems or data between the multitude of applications that control internal operations is simplified by internal APIs.

Partner APIs
This class of APIs is private and can be used between organizations with a partnership agreement. It allows communication between two strategic business partners and confidential data surrounding their dealings can be shared between them when authorized. Companies have public APIs that their partners can easily connect to and get updated.

Open APIs
Open APIs are public and provide developers with programmed access to authorize data of software applications or web services. They are usually published on the internet for easy and free or paid usage by consumers. This is the type of API that personal finance apps need for access to financial data from commercial banks.

Use of APIs for Personal Finance Apps

Personal finance apps provide various financial products and services like payments, savings, loans, investments, etc. A lot of financial data passes through these apps and similar data also passes through traditional bank accounts. Open banking regulation in Nigeria now allows the use of APIs to facilitate sharing of these financial data when authorized by consumers.

There are different kinds of APIs but Financial APIs are the ones that personal finance apps use. In a none financial scenario, APIs will allow your login details to be entered easily for access to your Facebook account from your Google password saves feature. However, with the introduction of Open Banking in Nigeria, personal finance apps specifically use “banking APIs” or “open banking APIs” which are financial APIs, to connect consumers' bank accounts to their financial services. For example, if your banking service provider has your address and BVN details, and you need to input those details to open an account with the Everyday money app, an API could connect the systems of the two software. That way, the budgeting app can access that information from your Google data to open your account. In another instance, an open API will help a loan platform access the credit history of a prospective user almost instantly, after authorization is received.

All financial APIs typically connect financial accounts to financial apps and services. Another type of financial API is a Brokerage API used to gather data on the stock and cryptocurrency markets. They provide insights for investors to make faster, better-informed trading decisions. For personal finance apps, APIs allow account holders seamlessly and securely link their bank account information to financial platforms or apps of their choice. They open up a new region of financial access by enabling new apps and services to be built using safe and secure connections to financial account data. A fintech company can easily create secure and personalized products and apps for its customers with access to financial information from banks.

Open APIs in Nigeria may foster more partnerships and increase financial innovation.  Some examples of Nigerian-owned financial APIs include Okra, Mono, and OnePipe.