In the digital era where customer demands and market needs can shift quickly, the ability to provide a unique experience that engages and captures the loyalty of a customer is a critical competitive edge. APIs give enterprises the flexibility to decouple functionality and experience, so that organizations can focus on building their unique differentiator to sell their products and services.
With digital success depending more and more on the customer experience, it becomes ever crucial for enterprises—including financial services & insurance—to adopt an API strategy that addresses the entire API life cycle—from creation to security, to analysis, to management. An effective way to get up to speed quickly on APIs and to implement a successful API initiative is to learn from the experiences of industry peers and apply best practices.
Overcoming API challenges with best practices
Based on our years of experience helping financial services and insurance firms develop APIs and implement successful API strategies, we’ve gathered 5 best practices to guide IT and business leaders on their path to building an API architecture of the future.
Assess your API needs upfront
Mapping out what the organization has and what it needs is a vital first step that must be undertaken in collaboration with business leaders. An assessment sets the foundation for the larger API strategy, but alignment must first be established between the API and the vital business functions it performs. Otherwise, enterprises may find that the APIs they build bring minimal ROI. In other words, do not rush the technology—an assessment brings the clarity your firm needs to ensure that the API strategy works the first time.
Optimize for reusability
The most valuable APIs are the ones most used. Reusability mainly refers to the process and system APIs, not experience APIs. Enterprises must look at their processes and break them down into functional units with the goal of deriving blocks that together orchestrate a process for a transaction. The process uses one API, but a highly reusable API can fulfill a particular business function or process across multiple channels. Keeping overall enterprise goals in mind, financial services firms and insurers should thus prioritize APIs strategically and more importantly, design APIs with this widespread usability in mind.
Build strong security into your API gateway
While having an API gateway is not needed, it is recommended, especially when APIs are exposed to external systems or used to leverage the services provided by third parties. An API gateway acts as an entry point to route services, aggregate results, and verify and track who or what is calling different channels. Building strong security in this gateway is essential; in this customer-centric era, a data breach could effectively ruin a company. For that reason, it is critical to protect data and develop safeguards against cyber-attacks.
Monitor and manage APIs
To ensure that APIs bring the desired business value, enterprises must be diligent about enforcing monitoring for API usage, performance, and impact. Monitoring should also include digital engagement across the network, application, and infrastructure, as well as external data feeds—from the source across different endpoints. Additionally, leaders should define success metrics in advance to help recognize, overcome, or explain the shortcomings of the API initiative in a timely manner.
Embrace visibility with governance
Distrust spreads when all parts of the business are not aligned. On top of developing a clear communication plan that builds enterprise-wide transparency, it is critical to govern the creation, use, and management of APIs. Some recommended guidelines include labeling APIs in layman’s terms based on their business service function to reduce confusion and prevent duplicity of effort, and compiling and publishing APIs in a repository/ library that is easily accessible and includes information on how to utilize the API. When the API initiative grows in the organization, creating an API Center of Excellence to manage how APIs are governed is also advisable.
APIs as a critical enabler
Applying these best practices can help financial services firms and insurers successfully leverage APIs to differentiate and develop the unique experience that will help them win customers of the digital future. By assessing their API needs upfront; optimizing for reusability; building strong security into the API gateway; enforcing monitoring and management of APIs; and embracing visibility with governance, can help enterprises avoid many of the common pitfalls faced on their API integration journey.
To find out more about how APIs are driving digital transformation in financial services & insurance, and beyond, check out APIs - Key Enablers of Digital Transformation in Insurance and Open APIs: A New Frontier.