Web-based APIs have been around for 15 years allowing businesses to provide their products as services. This approach allows for partnerships between companies with little human interaction. When development is complete, one company’s program talks to another company’s API—often the end user has no knowledge that the features at their fingertips are provided by multiple businesses working together.

Since the inception of web APIs, their usage has continually evolved. There are APIs designed to be public and open, while others are provided more restrictively through strategic partnerships.

APIs provide the building blocks for developers to easily construct new, enhanced tools by clearly defining how to interact with the system. This allows those developers to combine their own offerings with another company’s free of active collaboration.

Most API implementations are still passive partnerships—one company provides an API and another decides to adopts it. The power is realized when two companies actively work together, securely connecting their systems, to create something entirely new.

This is accomplished by each customer providing a private API opening up access to internal data and functionality that otherwise would take tremendous time and resources to expose and integrate.

The right collaboration on this level can fundamentally change an industry.

Public APIs

Most of the APIs we see are public, specifically designed to spread notability and product usage by allowing others to innovate with the company’s technology.

A public API serves as a proof point for a company’s value, or that same API could be combined with another business’ to build a more tailored solution of greater value. This approach has proven successful and is growing. When Amazon began offering cloud computing services like S3 and EC2, the API became a first class citizen—inseparable from the product itself.

Dwolla has had a public API since the early days—our open API has spawned quality tools of all sorts to improve the Dwolla platform. Some of these tools were developed by outside individuals interested in the platform, while others were created by businesses looking to leverage the Dwolla network to enhance or support their own product.

The current feature set continues to expand; it now includes transactions, scheduled payments, and MassPay. All of these tools are powered by our open API.

Private APIs

Private APIs work on the same principles as public; however, they are provided as part of specific partnerships and often expose more sensitive—or business critical—information. These APIs are designed to allow developers within the organization as well as close customers to leverage existing systems in a uniform way.

Example: The Dwolla API provides the ability for customers to transfer money to their users via the Dwolla platform while maintaining control over the look and feel of the experience. Customers gain the benefits of fraud protection and security while avoiding compliance headaches.

Another example is our recent partnership with BBVA Compass. It is a collaborative endeavor—BBVA Compass uses our FiSync API to access real-time transactions, while we utilize BBVA’s (also private) API to access applications much closer to their banking core.

The BBVA Compass/Dwolla FiSync partnership was designed to open the possibility for anyone within BBVA’s banking network to instantly send and receive money. By designing our software in conjunction with each other’s APIs, we created a seamless, secure passage for our two distinct financial industry businesses to work together in a powerful new way.

Discovering the value of API partnerships

Providing a private API reduces the cost of entry for banks and simplifies the complexity of business integration. The private API also provides security through established standards of authorization, tokenization, and encryption. Without even considering innovation, this approach to business collaboration has immediate value.

According to Gartner, 75% of the top 50 global banks will have launched an API platform by 2016. A trend that shows even slow moving banks see the value in trying to make use of APIs.

The benefits of this newer, more technologically-open banking remains to be seen, but it is a first step toward modernization of a huge industry.

Having an API is not enough, and turning that interface into innovation is more easily said than done—only time will tell who can effectively transform an API into business value.

There is nothing industry-specific about this approach. The value of two-way API relationships is not tied to the financial industry.

APIs help businesses integrate more seamlessly with each other by creating a common language and platform for communication, breaking down potential barriers.

This next phase of API collaboration isn’t a new concept, but its value and potential are still in explorative stages. Current indicators, as well as our own experiences, suggest that identifying ways to collaborate smoothly and painlessly via APIs will lead to exciting opportunities—opportunities to simultaneously increase security and productivity, add value to existing products, and extend market reach.


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