Application Programming Interface (API) And Its Role In Business

What is API?

The acronym API stands for application programming interface. Application Programming Interface (API) is essentially a mechanism that allows two software components to communicate via set commands and protocols. APIs operate within a client-server architecture, facilitating communication between clients and servers. Thanks to APIs, two unrelated apps can exchange data or carry out a function with ease. An example of a common workplace API is the Slack API, which allows individuals and teams within a Slack workspace to communicate remotely and seamlessly.

What are APIs' main functions? They include:

1. Data sharing – such as a travel booking site compiling flight timings and latest fares from airlines.
2. Integrations – for example, a cross-platform messaging integration between Slack and Microsoft Teams.
3. Content embedding – such as an e-commerce company embedding a video from YouTube on its app.
4. Internal systems – for example, a company integrating its customer relationship management system with its marketing system.

While APIs appear most suited for digital companies, they are in fact used across industries – by financial institutions and manufacturing companies to government organisations and healthcare providers. In Singapore, for example, a national map provider shares its APIs with the public, businesses, researchers, and government agencies allowing them to be repurposed. This Singapore API server accepts queries and requests for data structures for both commercial and non-commercial purposes.

API types

• Public APIs: So called because they are accessible to all. Businesses using public APIs allow open access to their data and services. Public APIs are also called open APIs or external APIs. Some public APIs are free while others charge a fee.
• Private APIs: They connect different software modules and systems within a single organisation, which is why they are also called internal APIs. 
• Partner APIs: They form connections between companies to facilitate business-to-business activities. Such APIs are only accessible to authorised partners.
• Composite APIs: These are a combination of two or more APIs. A composite API comes into play when, say, a single function requires multiple information sources.    

Another way to categorise APIs is by functionality:

• Web APIs: As the name suggests, a web API faciliates communication between web-based systems such as web browsers and web servers. Some popular web APIs use HTTP, HTTPS, and XML formats to perform functions such as retreiving data or updating it. Web APIs are widely used in the social media, payments, and healthcare space.
• Remote APIs: A remote API links two or more separate systems or devices. Remote APIs work by allowing the client to access a resource outside of the device from where the request is made – for example, a remote employee accessing workplace resources through a home computer.
• Database APIs: These allow applications to access information held in databases and manipulate that data.
• Operating system APIs: An operating system API allows apps to interact with a computer's operating system (OS) and essentially operate the computer through access to resources such as its memory, storage, processor, etc. The Windows, Google, and AWS APIs are well-known operating system APIs.
• Browser APIs: These APIs are built into browsers. They are be used to extend the browser's functionality and perform complicated functions using the browser's data resources.              
• Third-party APIs: These APIs are not built into your browser but provided by third-party platforms such as YouTube, Facebook, X, and Google. Third-party APIs are created externally and incorporated into your apps to enhance them.
• Server APIs: These APIs extend the functionality of web servers.

How does API work?

All APIs follow a request-and-response format between a client and server. The app making the request is the client while the one that responds is the server with the API acting as the bridge between the two. For example, a travel app making flight enquiries is the client while the airline providing the answers is the server.

To know more about the workings of APIs, we need to understand these terms:

API call

When the client sends a message to the server requesting access to information or a service, it is called an API call or API request. The act of submitting one’s login details in order to access data on an app or website is categorised as an API call. There is more than one way in which APIs send requests, the five most common methods being:

• The GET method is used to retrieve data.
• The POST method is for submitting fresh data to create a new resource.
• The PUT method allows one to update or edit existing data. 
• The DELETE method deletes a data resource.
• The PATCH method is used to make a partial update of a data resource.

API key

Each API call requires an API key, which is a unique alphanumeric identifier. The API key holds access rights. When an API call is performed, the server checks the API key to check if the client is authorised to receive the requested service or information. If the key doesn’t match, the server declines the call.

API token  

An API token is similar to an API key as it is also made up of a string of code and is used as an identification tool. However, in particular API calls, API tokens are more complex and carry more information about the client. They not only identify the client but also their rights and levels of access.

API protocol types

While the request-and-response format is common to APIs, it must be noted that not all APIs work in the same ways. Different APIs follow different protocols or architectural styles, the most common ones being: 

REST

A large chunk of APIs today run on REST, which is short for Representational State Transfer. This API design and architectural style uses the request methods mentioned above such as GET, POST, PUT, etc. With REST APIs, each resource – be it data, services, or objects – is identified by a URL. The REST APIs are popular among businesses that are involved in transfering data on the web.

SOAP

The Simple Object Access Protocol (SOAP) uses a more structured and complex way to send messages between client and server. A predecessor of REST APIs, SOAP APIs are popular among older, established, and legacy web services businesses. While they are known to offer high levels of security, they are also slower than most APIs.

REST vs SOAP

RPC

Like REST, the RCP (Remote Procedure Calls) architectural style is popular among web API designers. However, it works differently. With RCP APIs, the server executes a function that appears to be local whereas it is, in fact, a remote procedure call – such as taking a photograph with a remote camera or starting a server remotely.

REST vs RPC

WebSocket

WebSocket APIs facilitate continuous two-way exchanges between client and server. This makes them highly suitable for businesses with a requirement for real-time communication protocols.

Benefits of APIs for businesses

From streamlining a company's internal workings to boosting the customer experience, APIs have multiple benefits for businesses;

Greater productivity

By facilitating seamless communication and data-sharing between software components, APIs help make an organisation’s internal systems more integrated and cohesive. With APIs, businesses can automate mundane and repetitive tasks, thereby cutting down on human error and streamlining operations. APIs also break down departmental silos and encourage collaboration, which improves overall performance and productivity. 

Improved customer satisfaction

For businesses, APIs are a powerful way of elevating the consumer experience. There are APIs to make every step in the customer journey – from product discovery and payment to support – better. Take the case of a payments app. Without APIs doing the heavy lifting, the app would have to handle every single function – money transfers, bill payments, balance checks, etc. As a result, it might not be able to deliver a satisfactory user experience. In contrast, an API-powered app would be able to offer instant transfers, competitive currency exchange rates, greater accuracy, and much more, significantly improving customer satisfaction.

Innovation and scalability

One of the greatest advantages of APIs is that they are reusable. They can be repurposed to create new functions time and again. In other words, APIs encourage continuous innovation, allowing companies to shorten their software development cycles, launch new products and services faster, and scale without reservation. Take the case of a fintech firm, which is looking to come out with a branded card. Now, it can work with a card issuance API or a traditional card issuance system like a bank. The bank will likely take time to develop the card and be expensive. But with a card issuance API, the firm will be able to design and launch its card in a comparatively shorter time and for a lower price. Furthermore, the API’s repurposing feature will allow it to introduce new features (a one-time discount, a special rewards programme, etc) and products without time, cost, and geographic constraints. With APIs, companies can scale faster, reaching new customers and markets.

Monetisation

Today, APIs have emerged as a strong revenue source. Lots of companies make their APIs public, initially offering them at no cost in a bid to attract new business partners and then monetising them. A weather forecasting platform selling access to its services or a fintech company charging businesses to use its payment APIs to accept and make online transactions are examples of API monetisation. Apart from such direct monetisation models, there are also indirect ways in which businesses monetise their APIs. Rather than generating revenue, indirect monetisation models aim to further the company’s objectives and goals instead. For example, Company A gives Company B full access to its APIs and data resources in exchange for Company B integrating its business with Company A.

Challenges of using API

While the benefits of APIs are numerous, businesses must be careful in their use. Here are two key challenges of using APIs and the best practices to follow for a trouble-free experience:

1. Take API security seriously 

As working with APIs involves accessing and exchanging sensitive data, data security and data privacy are of the utmost importance. Data breaches caused by APIs with poor safety protocols can disrupt all of a business' operations and negatively impact their customers and partners, leading to a loss of reputation and painful financial losses. Taking security seriously has become even more urgent in the face of rising cyber attacks, which are also becoming increasingly sophisticated. These best practices can go a long way in protecting your business:

• Protect data stored on systems or flowing between APIs with encryption, which turns information into code.
• Access to resources must be controlled through rigorous verification tools such as authentication and authorisation.
• Make sure to share information only with the consent of the data owner.
• Store and share only that data which is necessary for your operations.
• Ensure a strong security protocol is in place before API implementation and conduct regular audits.

2. Insist on detailed and quality API documentation

An API is a tech tool and complications are a given. Developers must provide and businesses must insist on clearly written and detailed documentation before implementing an API. After all, API documentation is not just a user manual but can be considered an agreement of sorts between the API service provider and the business partner. A well-rounded API document must include:

• A quick user guide and tutorial.
• Terms of use.
• Information and explanations on the fundamentals such as API calls (requests made to the API), authentication, rate limits (the maximum number of requests that can be sent to an API in a given time), and so on.
• Examples of different requests, their response formats, error messages, etc.

Apart from the contents, good API documentation should be easy to understand, written with its target audience in mind, and come in a format that supports automatic updates. The party buying the API service must carefully read the documentation and consult the service provider in case more clarity is required before entering into an agreement. All this due diligence will help them leverage the API to its maximum potential.

API Key takeaways

• APIs facilitate communication between two or more software components and/or systems.
• APIs make it possible to access information (weather conditions, flight timings, etc) and shop for products (theatre tickets) and services (banking, payment processing) seamlessly and quickly.
• APIs are infinitely reusable. They are often compared to Legos as you don’t need to start from scratch every time you want to create a new product, service, or feature.
• APIs help businesses innovate and scale at speed. They also cut costs, improve productivity, and open up new revenue streams.

Aspire API offerings for your business

Our Payout API offers third-party integrations with your Aspire Multi-Currency Account, helping you automate and streamline your payment processes. The API comes with best-in-class support and sandbox testing features.

Aspire also offers a Payment Gateway API that supports 26-plus payment methods and comes with upfront pricing and easy integrations.