What are banking APIs and how do they work

Banking APIs (Application Programming Interface) are a kind of "connecting bridges" between the bank's system and external applications or web services. They simplify the exchange of data and command requests to make payments, transfers, and other financial transactions work quickly and securely. For Kazakhstan, as well as for the whole world, the correct integration of banking APIs is extremely important today: the convenience of clients, the speed of service, and the competitiveness of the business depend on it.

Definition of banking APIs

In simple terms, a banking API is a set of rules and tools that programmers can use to "communicate" with the banking system. Without an API, they would have to manually develop countless modules and protocols to interact with the bank. But when there is open access via an API, everything comes down to connecting ready-made "drives": send a payment request, get a response about the account status, check the balance - all this is done according to clear and unified standards.

Types of banking APIs

Banking APIs come in different varieties, and each option is tailored to certain tasks — from organizing mass payments to the bank’s internal services. Below, we’ll look at the main types of banking APIs, their features, and areas of application to understand how exactly they simplify financial processes and improve the quality of customer service.

Open APIs

Open APIs are created for external developers and companies. For example, when a startup wants to quickly implement online payments or check a client’s financial reliability, they use such open interfaces. The bank, in turn, receives new sources of income and expands its presence in the market by providing third-party services with access to its technologies.

Closed APIs

Closed APIs are designed for a limited number of partners or for solving highly specialized tasks. Most often, access to such interfaces is granted to verified counterparties in order to use the bank's advanced functions, such as mass payments or additional customer verification. Such APIs operate according to strict security rules and require an increased level of data protection.

API for internal bank needs

Internal APIs are used only within the bank. For example, if a bank automates the loan issuance process and wants different departments to have access to a single scoring system, APIs will be indispensable. This reduces the likelihood of errors, speeds up the solution of business problems, and simplifies interaction between departments.

How Banking APIs Work

Banking APIs provide a secure digital dialogue between financial systems and external services. Below, we will look at what technologies they work with and how exactly data is exchanged, allowing payments and other transactions to be made in near real-time.

Basic technologies and standards

Unified protocols and data formats (REST, JSON, XML) are important in the world of banking APIs. Information is usually exchanged via HTTPS for maximum protection. Important elements are tokens and encryption keys, which confirm that the system is accessed by the service or user who has the right to do so.

The process of interaction via API

Simply put, the bank and the external application “agree” on how exactly they will exchange data. The application sends a request (for example, to check the balance) and the bank processes it in its internal systems then responds with a standard message (for example, approves the transaction). All this happens almost instantly and around the clock, which gives companies and people new opportunities for convenient and secure financial transactions.

Examples of using banking APIs

Banking APIs are used in a variety of areas: from online stores to mobile apps. Below we look at a few specific scenarios that show how these interfaces simplify financial processes, increase convenience for users, and open up new opportunities for business.

Payment and transfers

Imagine a small seller who decided to accept payments on social media. When a buyer selects a product and clicks "Pay", the bank checks the balance via the API, "approves" the transaction, and instantly notifies the seller that the order can be sent. The entire chain - from clicking the button to arranging delivery - takes a few seconds, and no one sits at the computer with a calculator, checking the data manually.

Personal financial management

Many popular applications for tracking expenses and income could not exist without banking APIs. Through them, the program automatically receives information about expenses, groups them into categories, and provides statistics in a visual form. This helps users better plan their budget and see where the money goes.

Lending and checks

When a customer applies for a loan, the bank may request information about their previous transactions and credit history. Thanks to the API, such checks take literally minutes, because everything is transmitted via encrypted channels and automatically. This eliminates the need for the client to collect paper certificates and gives the bank prompt access to the necessary information.

Prospects for banking APIs in Kazakhstan

The prospects for banking APIs in Kazakhstan are largely related to the development of ecosystems around major players in the market. For example, Kaspi Bank already provides its customers with not only classic financial services, but also opportunities for online shopping, utility payments, and booking various services. The bank's entire infrastructure is built on the basis of API, which gives it flexibility in connecting new partners. Halyk Bank, in turn, is improving its online services and is increasingly interacting with fintech projects to ensure convenient and secure integration.

At the same time, new companies focused on electronic money, mobile wallets, and specialized applications for expense management are actively emerging in the country. ForteBank, for example, offers clients a series of products that allow transfers and payments for various services in just a few clicks. Jusan Bank also contributes to the formation of the fintech environment by creating remote services and inviting technology startups to collaborate.

Wide integration of banking APIs opens up opportunities for Kazakhstani companies to enter international markets. Some teams that have managed to establish an internal infrastructure for interaction with banks are already trying to scale the same solutions abroad by entering into partnerships with foreign financial organizations. Thanks to this approach, Kazakhstani fintech has a chance to attract foreign investment and compete on equal terms with international players.

Finally, it is worth emphasizing that the widespread implementation of banking APIs is an integral part of digital transformation. Government initiatives to develop electronic platforms encourage banks and other financial organizations to accelerate modernization. Those who are the first to successfully implement APIs automate internal processes and thereby save resources, improving the quality and speed of customer service. All this helps Kazakhstani banks meet the growing needs of users and supports the general trend towards digital innovation.

Concept of Open API and Open Banking Development in the Republic of Kazakhstan for 2023–2025

Digital technologies are actively developing in Kazakhstan, and one of the key initiatives is the concept of Open API and Open Banking development. This document was approved by the National Bank of the Republic of Kazakhstan jointly with the Agency for Regulation and Development of the Financial Market and the Agency for the Protection and Development of Competition, in order to continue the systemic and gradual digital transformation of the financial sector. Particular emphasis is placed on improving technology and protecting consumer rights.

Open Banking allows banks to provide access to customer data to third parties only with the consent of the customers themselves. This increases the convenience and speed of service. For example, a bank customer can manage several of their accounts through one application, automatically make regular payments and transfers, optimize financial reporting, and analyze income and expenses.

Open Banking is based on Open API technology, a globally recognized information exchange protocol. The concept development included preliminary discussions with second-tier banks, during which the current practice of using API was clarified, and the infrastructural and regulatory prerequisites for the implementation of open banking were assessed.

The development of this area in the financial sector of Kazakhstan opens up new opportunities for the emergence of innovative financial services, products, and business models. Thanks to the cooperation of second-tier banks and other providers of payment solutions developed based on Open API, clients have even more convenient and secure tools for managing their finances.

Results

Banking APIs are no longer just a buzzword — they are a real tool for developing financial services, increasing customer loyalty, and accelerating business processes. API integration helps companies quickly respond to market demands, create convenient services for customers, and expand their operations through partner solutions. In Kazakhstan, where demand for digital services is growing, proper implementation of banking APIs plays a key role in creating competitive advantages and more accessible financial products for all citizens.