APIs Are Banking’s Future

By: Luke Hammock, Head of Embedded Finance, Transaction Banking

Will every company become a fintech? Many now argue that almost all companies will derive significant revenue from financial services in the not-too-distant future. The very infrastructure of banking is changing, with the result that it’s becoming much easier to introduce new financial products and needed innovations. 

The workhorse of this new financial infrastructure is the application programming interface, or API. APIs provide repeatable and standardized blueprints that allow different systems, companies, and organizations to interact with each other.

Consider how hard it would be to launch an ecommerce startup to sell vintage clothing, for instance, if you had to solve the problem of accepting credit card payments all on your own. Instead, there are API-based solutions that do all the hard work for you and make for the frictionless integration of card payments on your website.

The market understands the importance of APIs, judging by the multibillion dollar valuations of fintech startups in this area. 

Built on APIs

At Goldman Sachs Transaction Banking (TxB), we embrace the idea that APIs are a driving force for financial services innovation today. The TxB platform, developed from the ground up in the public cloud over the past three years, is fully API-based. This means every new capability we develop is API-accessible and that we’re not limited to historical transaction bank interaction models (website, batch files, SWIFT). Our platform supports real-time access to data and seamless connections for our clients to a slate of financial services that would have previously been unimaginable.

We see great potential in APIs to not only support the digitalization of corporate treasuries but also to distribute banking capabilities more broadly across the business landscape under the rubric of banking-as-a-service (BaaS). TxB can power back-end capabilities, not only user-facing interfaces.

Our API-based system allows corporate clients and small business customers to access specific banking capabilities without ever interacting directly with TxB. What might this look like? A small business could, through the platform of a TxB partner, open a virtual account or make a U.S. ACH payment or perhaps retrieve a rate for a foreign exchange transaction. Already, TxB has partnered with Stripe to launch a BaaS business that enables Stripe customers to own and operate bank accounts with Stripe directly.

All of this innovation is powered by APIs. And TxB has invested in making its APIs developer-friendly and best-in-class (they are available on our developer portal, developer.txb.gs.com).

Work remains to fully develop the new API-based financial technology ecosystem. But moving past legacy transaction banking systems that were designed long before APIs came to the fore begins to bring the promise of a new banking infrastructure within reach.