What is the function of an Application Programming Interface (API) used by banks?

The function of an Application Programming Interface (API) in the context of banking is primarily focused on enabling the development of applications that facilitate interactions with banking services. This includes mobile banking applications, which are crucial for providing customers with access to their accounts, transaction capabilities, and other banking functionalities through their smartphones or other devices.

APIs allow different software applications to communicate with each other. In the banking sector, this means that financial institutions can expose certain functionalities or data to authorized third-party developers in a secure manner. This helps banks innovate by creating efficient digital solutions that improve customer engagement and service delivery. The ability to leverage APIs is what makes developing mobile banking applications feasible and effective, as they allow developers to integrate various banking functions easily.

While APIs may play a supportive role in security and data management, their primary function is not to restrict access to financial data or create physical infrastructure like branch networks. Additionally, APIs are not used for handling physical cash transactions directly, which are managed through different systems and processes. Instead, APIs facilitate the digital exchange of information which can include querying accounts, executing payments, and accessing services that might be needed for mobile applications.