Imagine how easy your financial ops would be if invoice data flowed directly from your AP system to your accounting software, or if receipts were captured at the register through your expense management software and flowed straight through to your ERP.
Welcome to the world of financial API integrations.
This article offers a quick introduction financial API integrations, including how your company can leverage them for maximum efficiency and accuracy in your financial data.
For more information about leveraging financial APIs to improve efficiency and make your business more scalable, download our free ebook Scale faster, do more: The API guide for modern business.
What is a financial API?
API stands for "application programming interface." At its essence, it's a way for different software programs to communicate with each other directly. APIs increase efficiency by letting computers access data automatically instead of relying on people to copy information from one place and paste (or type) it into another.
In the financial industry, APIs let applications connect to banking platforms, accounting software, ERPs, and many other systems. Financial APIs save accounting and finance teams hours of work by automating routine tasks like updating balances, entering transactions, and much more.
Types of financial data API integrations
There are several different types of financial APIs, categorized by the type of data they interact with. Here are a few of the most common.
Account verification for financial institutions
Account verification APIs link software to financial accounts—banks, credit cards, loans, and so on. The process verifies that the user owns the account, helping prevent fraud.
OAuth is one method that's commonly used for account verification, in which users request the connection and authenticate their account by entering their bank credentials on the financial institution's domain.
Balance-check
Balance APIs let fintech apps read account balances in real time. This can help users avoid overdraft fees by ensuring they have enough funds before making a transaction. Balance-check APIs also enable pre-funding, helping users access their funds faster for time-sensitive activities like trading stocks.
Transactions
Transactions APIs connect to financial transactions data, allowing fintech apps to offer budgeting tools, automatic savings, investing tools, and more. By analyzing transaction history, such as historical data about spending or historical stock data, apps can provide personalized financial planning insights to help users meet their financial goals.
Account aggregation
Account aggregation APIs consolidate data from multiple financial accounts into a single dashboard. This allows users to view all their financial information in one place, making it easier to manage their finances.
For example, a business can see all its cash, credit, and loan information in a single interface, as well as financial statements, market data, and more.
How do financial APIs work?
Financial APIs are used by a wide range of entities in the finance industry, including banks, fintech companies, investment firms, and more.
These APIs enable seamless communication and data exchange between different software solutions or platforms, allowing for streamlined automation in financial and accounting processes.
To learn more about how financial APIs work, download our free ebook Scale faster, do more: The API guide for modern business.
How financial API integration works
Financial API integrations can work in different ways, depending on what's needed.
Many APIs are built directly into apps through the process of software development, so you can take full advantage of seamless data syncing without any extra coding.
Other APIs let you customize software to connect to unique systems, like proprietary accounting software or a company intranet. This requires special coding — the API gives your software developers a clear, secure way to connect to the software.
How are APIs changing financial products and services?
First and foremost, APIs are reducing the need for manual work. People used to copy numbers from one system into another on a regular basis — from credit card statements into accounting software, from budgets into purchase order systems, and so on.
Today, computers can do that work, speeding up accounting workflows, reducing the chance of human error, cutting costs, and opening up new opportunities.
Increased access and choice
APIs are enabling a more connected and open financial ecosystem, allowing businesses and consumers to access a wider range of financial services beyond their primary financial institution.
Innovation and value creation
API integrations are driving innovation in fintech companies, creating new value and capturing market share in the financial industry.
Empowerment and convenience
Businesses and consumers are benefiting from faster access to funds, more options for managing their finances, and innovative financial services that provide convenience and empowerment.
Small business opportunities
Because of APIs, small businesses can integrate more security and convenience into their financial systems than ever before. They can make digital payments, accept digital payments, create virtual cards, implement digital invoice approval systems, and much more, helping them scale faster and compete in today's digital world.
How your company can leverage financial API integrations
The easiest and often most cost effective way to leverage financial API integrations is to use systems that come with API integrations built in. These systems can sync securely with your financial institutions and accounting software without any need for special coding or technical APIs.
However, if your company needs a unique integration, API calls provide a fast, easy, secure way to connect with your data sources the way you want to, including advanced features you build yourself.
Learn more about building your own unique integrations in our free book Scale faster, do more: The API guide for modern business.
Using APIs to build your own integrations
To build a financial integration with application programming interfaces, start by creating a vision for your integration, identifying the financial data and financial institutions you need access to, reading the API documentation, and thinking through performance and data retrieval options.
Each of these steps are covered below.
Creating a vision for your integration
To leverage financial APIs effectively, start by defining exactly what it is you want to achieve. This involves asking and answering questions like:
- Why do we want to integrate with this solution?
- What financial data do we want to connect to, and why?
- What manual work are we trying to automate?
- What fundamental data do we need each system to be able to read and work with?
Understanding your fundamental data needs
The next step in creating a vision for your integration is identifying the data you need to interact with.
Do you need historical data from your own financial institutions? Historical market data? Current market data? What you're trying to accomplish will drive the data and the level of access you need.
If you're building reports such as financial statements, you may only need access to the data you're reporting on — and you probably only need to be able to read that data, not change it.
Your financial data needs will flow directly from your integration vision and what you're trying to accomplish. Once you've identified the data you need and whether you need to change it or just read it, the next step is to read the API documentation.
Reading the API documentation
The software's API documentation will let you know how to connect to the software securely, how to access the data you need, and how to interact with it.
These methods will vary from one system to another, and the depth and clarity of the API documentation will vary significantly.
If you know you'll need to code your own integration for your financial software, be sure to review the API documentation before you make your choice.
Thinking through performance and data retrieval
In building an API, it can be tempting to connect to more data than you really need. That isn't necessarily a bad idea; just be sure to think about technical indicators like speed and performance before you make that decision.
Having access to more data than you need leaves the option open to add new reports and financial planning functionality without having to code a new integration, but it can also flood your system.
Think about how that data will be called, how much will be pulled, and how often, so you can design an efficient, effective integration that serves your needs.
Need a custom integration for your tech stack?
If you need an integration for your financial tech stack, consider BILL's financial operations automation platform.
BILL integrates with most common accounting and ERP systems without any need for custom coding, and it also offers APIs if you need a custom solution.
Learn more about automating your financial operations with BILL.
Case study: Puzzle accounting software
Puzzle's accounting software is built for fast-growing start-ups, complete with all the collaboration, design, automation, and AI you'd expect from modern financial software.
To set themselves apart, Puzzle’s API is designed to attract partnerships. They recently expanded their integration capabilities by partnering with BILL.
“It's not a secret that BILL is the largest in the space,” says Sasha Orloff, Co-founder and CEO. For Puzzle, the integration with BILL was a logical next step.
The team leveraged the BILL API platform, meeting directly with the BILL developer team. “It only took two days to get everything up and running,” says Orloff, “and we sent it out to our customers, immediately saving them hours every month closing the books and giving them the benefit of both cash and accrual books—making founders and bookkeepers very, very happy.”
