In retail investing, an essential player is working behind the scenes.
Application programming interfaces (commonly abbreviated APIs) have grown 1000% in the past five years, witnessing a period of explosive growth. By enabling different companies’ networks to “talk” to one another, APIs have become a driving force behind retail investing innovation, empowering incumbents to stay relevant and allowing startups to gain fast traction through partnerships.
Now, what exactly is an API? Commonly compared to translators, or the waiters in a restaurant, APIs are the messengers that act as essential bridges between different companies’ networks. Companies use APIs to expand their brand’s reach and drive engagement from their users. For example, Twitter and Facebook use APIs to enable their users to “like” or “share” posts from third party websites. E-retailers like Amazon use APIs to sell products within complementary apps, penetrating untapped communities of potential customers and driving sales growth.
For any company, an API is a tool to connect a product with new communities. As more companies learn to leverage APIs to cash in on new and existing customers, the API economy has exploded. The number of publicly available APIs doubled in just 18 months, from 2013 to 2015, and shows no signs of slowing down. Rather, spending on API management is expected to increase by 300% by 2020, according to Forrester Research.
Despite its initial hesitancy, the financial world has embraced the API; as more banks have made their APIs publicly available, it is becoming a distinct disadvantage not to have one. Between 2009 and 2013, the number of financial APIs increased by 470%, and it continues to grow today. In retail investing, brokers use APIs to integrate trading, account opening, and other financial services across a variety of third party mobile apps and websites, ensuring that their product weaves seamlessly into their customers’ daily lives.
Today, innovation in retail investing has just breached the tip of the iceberg, making it one of the most exciting areas of FinTech. As an API technology provider, we reject the popular “disruption” narrative in favor of a more nuanced reality: API technologies offer an evolution rather than a revolution, bringing incumbent brokers up to speed with the increasingly mobile and app driven investing market.