The financial technology space is fascinating. We’ve witnessed that a new tech paradigm or a novel business model takes time to get acceptance. But even with one successful event, a whole segment in FinTech could take off like crazy. Financial infrastructure API is one such segment: Visa had acquired Plaid for $5.3 billion. In the last two to three years, with the rise of open banking, APIs in general and financial infrastructure APIs, in particular, have been of much interest. APIs have helped FinTech companies and even larger companies by not having to build entire stacks by themselves. By using specific APIs, startups can now go to market sooner by focusing on their core areas. APIs have also allowed small companies to compete with larger incumbents by solving problems that the larger establishments ignored or could not address. It was the CEO of Kantox that said very astutely that “the megatrend in financial services is neither FinTech nor blockchain, but the shift from batch to real-time.” And this is possible with financial infrastructure APIs.
In the infographic below, we have mapped a few of the prominent companies across the geographies. We have also mapped a few of the startups that the larger incumbents have acquired. This space is finally getting the attention it deserves:
Here are a few notable startups that provide financial infrastructure APIs:
Alpha Vantage: Alpha Vantage provides free APIs for real-time and historical data on stocks, forex (FX), and digital/cryptocurrencies.
Finicity: The Finicity platform and API enable software developers to securely and easily integrate customer financial data into their apps. With the RESTful-based Finicity Aggregation API, developers can deliver exceptional UX by leveraging key API features.
TrueLayer: TrueLayer provides a universal API through its data API to access data from the users’ bank account and cards. The company also provides a payment API that enables a user to initiate a payment transaction directly from the user’s bank account by an API.
Setu: Setu is an application programming interface (API) infrastructure startup that offers APIs across bill payments, savings, credit, and payments.
Tink: Through various APIs, Tink provides four basic functionalities, i.e., Account Aggregation, Payment Initiation, Personal Finance Management, and Data Enrichment. Third parties can use these to roll out their own standalone apps or integrate them into existing banking applications. The company recently raised €90 million at a post-money valuation of €415 million from Dawn Capital, HMI Capital, Insight Partners, and Poste Italiane, along with previous investors such as Heartcore Capital, ABN AMRO Ventures, and BNP Paribas’ venture arm, Opera Tech Ventures.
Railsbank: Railsbank offers a banking and compliance platform that allows users to connect their companies with Railsbank’s partner network, including banks, financial services, and compliance providers, thereby enabling them to integrate their business or mobile app with global banking services. The open banking & compliance platform helps companies, including FinTechs, with global banking requirements that can only be accessed programmatically via an API.
YAP: YAP is a payments-as-a-service platform. Yap enables companies to develop and roll out their own payment solutions rapidly. Users can plug-and-play from an a-la-carte of payment methods such as plastic, virtual, tokenized, and in-app. The company was formed jointly by DCB Bank and M2P Solutions.
Some of these M&As have interesting reasoning, such as the acquisition of Treezor by Societe Generale to accelerate its open banking strategy and support the development of FinTechs and neo-banks. Deutsche Bank’s acquisition of Quantiguous Solutions to accelerate the development of its open banking platform. Then, acquisitions to launch new products into the market such as Envestnet’s acquisition of Yodlee for helping their clients in seamless client onboarding and compressive planning; TradingView’s acquisition of TradeIT to add instant trading APIs that will bring mobile trading to its customer; Plaid’s acquisition of Quovo to expand into wealth management sector; Coinbase acquisition of Blockspring to use its capability of data gathering from various APIs; and Apple’s acquisition of Stamplay, which has experience in the financial payment industry.
The API economy is excellent, but there’s a problem: APIs are being held back by old-school financial infrastructures that cannot keep up with the speed we expect as modern consumers. We’re living in a world of instant transactions, but many API-enabled applications and servers can take up to three days for transaction data to come through. As we see an increasingly global approach to financial and data management, we’ll see an increased demand for real-time information sharing between platforms and services in different countries – companies like TransferWise are rightly focusing on this as a priority, offering real-time integration for their banking API partners. The difference between payments in India (with UPI) and the US (with batch processing via ACH) is worth understanding. Real-time APIs will be in high demand without a doubt.
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