What Is API Integration And How Does It Improve Business Efficiency?

What is an Application Programming Interface or API?

First, a little more on what an API is. An API is a string of instructions or commands comprised of code. It helps applications and software components communicate and interact with each other. With the help of APIs, these apps can connect and share data or perform a pre-determined function without human intervention. The primary functions carried out by APIs include data exchange, data integration, and content embedding.

There are different types of APIs depending on functionality:

• Public APIs or open APIs are accessible to all.
• Partner APIs can only be accessed by authorised partners.
• Private APIs or internal APIs connect an organisation’s internal systems.
• Composite APIs are a combination of two or more APIs.

Another categorisation of APIs exists based on format or protocol. The most common API protocol is REST (Representational State Transfer), which is widely used to perform web services. Other popular API protocols include SOAP (Simple Object Access Protocol), RPC (Remote Procedure Call), and WebSocket.

For a deeper understanding of APIs and how they work, you can read our article ‘What Is An API And What Is Its Role In Business?’.

What is API integration?

An API is a powerful tool on its own but its value increases multifold with API integration. An API integration is the process by which two or more apps can engage in real time through APIs. Such an API connection creates compatibility between different APIs, allowing them to exchange data or execute a task. Depending on the type of API integration that has been carried out, connected apps can synchronise data (data synchronisation is the one-way or two-way movement of information). Integrated APIs can also extract data from multiple sources and transform it into a single consolidated database (a process known as data integration).

Here's an example of how an API integration works: let's say, a retail company integrates its customer relationship management (CRM) platform with its enterprise resource planning (ERP) system via APIs. It then syncs its product inventory data so that any depletion or addition of products is automatically updated in both systems. This helps the retailer prevent losses due to inadequate inventory and automate invoicing so that clients are invoiced as soon as the sale is processed.

This example shows that with API integration, information held in one database can be accessed and shared by multiple systems within an organisation. Additionally, the company can make its APIs available to customers, suppliers, and other external partners so that they, too, can access this data.

The benefits of API integration are numerous. It facilitates efficient workflows, improves customer experiences, and enables real-time data sharing between various applications, ultimately helping organizations achieve their goals of automation, collaboration, and innovation.

How does API Integration Process work

The API integration process involves several critical steps to ensure a smooth and effective connection between applications:

1. Planning and Strategy: Start by defining the goals and objectives of the integration. Identify the applications and APIs involved, and determine the data flow and integration requirements. This step sets the foundation for a successful integration.
2. API Selection: Choose the APIs that will be used for the integration, considering factors such as compatibility, scalability, and security. Selecting the right APIs is crucial for ensuring a seamless connection.
3. Development: Develop the integration logic using programming languages and tools to connect the APIs and enable data exchange. This step involves writing the code that will facilitate communication between the applications.
4. Testing: Test the integration to ensure that it works as expected. Troubleshoot any issues that arise to ensure a smooth and error-free connection.
5. Deployment: Deploy the integration in a production environment. Monitor its performance and security to ensure it continues to function as intended.

By following these steps, businesses can create robust API integrations that enhance their operations and drive efficiency.

What are the different types of API Integrations (native, in-house, 3rd-party)

There are several types of API integrations, each with its own set of advantages and use cases:

1. Native API Integration: This involves using an application’s pre-built integration with another application. Native integrations are often the easiest to implement, as they are designed to work seamlessly with the applications involved. An example of this would be Aspire's native integration with accounting software like Xero, Quickbooks etc. - where both platforms can communicate with each other effortlessly and no custom code is necessary for the integration.
2. In-house API Integration: This involves building the API integration from scratch using internal resources and expertise. In-house integrations offer a high degree of customization and control but require significant time and technical expertise.
3. 3rd-party API Integration: This involves using a middleware platform or integration tool to connect the APIs and enable data exchange. Third-party integrations can save time and resources, as they often come with pre-built connectors and tools to facilitate the integration process.

Each type of API integration has its strengths and is suitable for different scenarios. Businesses should choose the type that best fits their needs, resources and use case.

Common API integration use cases

Finance

API integration is responsible for taking banking services to a wider audience and making banking and payment processing as easy as tapping on a button. With bank API integration, account holders can access their accounts anytime and anywhere, transact easily and securely, and access their financial data in real time. Many banks have partnered with businesses, including financial service providers, to offer new financial products and features at competitive rates. Furthermore, most businesses use online accounting software platforms, which in turn leverage bank API integration to form direct links with business bank accounts.

Healthcare

Healthcare providers use API integration to offer information and support services to patients, give medical staff access to latest research data, work effectively with partners such as government agencies and insurance companies, and optimise internal systems. An API connection can also facilitate data exchange between healthcare providers and create consolidated health records.

Logistics

API integration has led to the rise of freight marketplaces, which match traders with frieght companies to streamline cargo transportation. Logistics firms use API connections to provide real-time freight tracking solutions to customers. Additionally, these integrations seamlessly connect diverse logistics systems such as transportation, inventory, and warehousing for supply chain and delivery management optimisation.

E-commerce

From automated inventory management and real-time shipment tracking to personalised recommendations, e-commerce firms have managed to elevate the customer experience courtesy of API integration. If buyers are spoilt for choice while paying for their online purchases, it is because of payment gateway API integrations.

API integrations: Buy or build?

As for how to go about building your API integration, you can do it in-house or outsource it to a third-party API integration platform.

Integrations that are built in-house are highly customisable but take time and cost a lot of money. They also require technical expertise and regular maintenance. Large corporations (such as Google and Microsoft) and companies with very specific API integration requirements are likely to take this route. Regular companies, on the other hand, might prefer to work with platforms that provide API integration services or API Integration tools. This method is not only cheaper but also takes less time because the integrations are pre-built. Maintenance and updates are also handled by the API integration tool provider. On the downside, outsourced API integrations are limited when it comes to customisation and control over the development process. Some might even pose security risks, so it is important to work with a reputed API integration service provider.

How API integration helps businesses, with examples

Did you know that API integrations impact business profit? In 2020, 66% of supply chain businesses surveyed by integration platform Cleo claimed to have lost USD 500,000 due to poor integrations. Apart from improving finances, API integrations have many other business benefits:

1. Real-time data processing

With the help of API integration, businesses can take action in real-time. An instantaneous API connection facilitates on-the-spot data exchanges between multiple apps and platforms, allowing companies to take quick decisions, respond to changes and challenges with agility, and offer customers a richer user experience.

Example: An e-commerce firm connects its inventory management system to its warehouse management platform via API integrations. With the real-time stock updates produced as a result of the API connection, the company is able to avoid both inventory shortages and surplus stocks.

2. Collaboration

Businesses can use API integrations to improve collaboration between internal departments or with external partners. Using the various API integration tools at their disposal – such as an API gateway integration that accepts, routes, and processes API requests – employees can make information flow automatically and seamlessly between applications. By breaking down silos and unifying systems, API integrations contribute to streamlined workflows.

Example: The partnership between Singapore’s PayNow and India’s Unified Payments Interface (UPI) – which was signed in 2023 – is a great example of the power of collaboration that API integrations hold. The PayNow API integration with UPI allows businesses (and individuals) in Singapore to transfer funds to India cheaply, securely, and easily from their PayNow account without signing up to the UPI platform, and vice-versa. The PayNow API integration is expected to vastly help small businesses by making cross-border transactions between the partner countries more economical, faster, and easier.

3. Efficiency

There are numerous ways in which API integrations inject efficiency into business activities. One, they enable automation of repetitive tasks, in the process reducing human error, saving time, and freeing up resources so that they can be put to better use. Two, they simplify complex processes. Three, API integrations make it possible to consolidate data from multiple sources, which in turn drives analysis and data-driven decision-making. Four, they foster innovation – you can develop a new product or app without having to do everything from scratch.

Example: Ride-hailing company Uber uses API integrations to improve services in more ways than one. With bank API integration, it offers a streamlined payment process for rides and delivery services. No more haggling for change! And with the Uber Receipts API integration created specially for businesses, partner companies can get real-time updates and details – location, fare, payment method, etc – of rides taken by employees on a special company profile on the Uber app. The updates are automated, so the business partner need not make a special request to Uber. This API connection is aimed at optimising spend management.

4. Scaling made easy

With API integrations, businesses can easily add new features to their apps and websites, develop new products or branch out to a new market without having to make significant changes to their IT system. Such scalability allows them to take advantage of growth opportunities and navigate market disruptions with ease.

Example: An online book retailer uses a payment gateway API integration to add new payment modes to its website/app. With a single integration, the company successfully enhances its user experience by offering multiple payment choices, real-time transaction updates, and robust security features.

API integration best practices

1. Prioritise security

According to a 2024 Gartner survey, API breaches lead to 10 times more leaked data than any other type of security breach, as a result of which 37% of organisations consider security a top challenge in using APIs. In this backdrop, it is critical that data is protected with encryption while in storage and during transit to avoid data leaks and theft. Making token-based authentication mandatory for API access is another safe practice. When selecting API integration service providers, it is always wise to go for reputable partners with rigorous API testing regimes. And, don’t forget to regularly assess and update API security protocols.

2. Stay compliant

Like security, there can be no compromise on data privacy. As API integrations facilitate the movement of sensitive data, these must be protected at all times. It is advisable to collect and process only that data which is necessary, and to obtain the owner's consent before processing the data. Different countries have different data protection laws and rules – Singapore, for instance, has the Personal Data Protection Act and Payment Services Act; the EU has the European Data Protection Board; and China enforces the Data Security Administrative Measures, to name a few. Businesses must be aware and strictly adhere to these laws where they apply. This is important in the face of rising cyber threats and vigilance by regulatory authorities.

3. Standardisation is important

Pick standard API architectural styles such as REST and SOAP whenever possible. Preferred for their consistency and good design, standard APIs bring a sense of familiarity, which translates to a smoother integration and implementation experience as well as time and cost savings. They are highly compatible with most apps and IT systems. The ease of use and familiarity trickles right down to the end user (your customer), who will thank you for the smooth experience.

4. Read documents thoroughly

Good APIs come with comprehensive and high-quality documentation, which includes the API connection meaning, guidelines for integration, usage limitations, and so on. Review the paperwork thoroughly to leverage the APIs to their maximum.

5. Pay attention to error handling

As with any technology, errors happen during API integrations. What your company needs is an effective error handing mechanism that sends out prompt alerts, allowing your team to act immediately to resolve the problem. The alerts should ideally be detailed, clear, and follow a consistent format. It is also a good idea to record recurring errors and use API testing tools during regular maintenance as this will help you identify and fix problem areas before they turn critical.

6. Plan well

For your API integrations to run smoothly, you need to plan ahead and plan well. First, define your project goals – for instance, are you looking to improve customer satisfaction or upgrade your employee onboarding process? You'll also need to determine your benchmarks, such as development time, time to market, and budget. The next step is to check your resources – the software, tools, people, and skills you need for the job. Then, document all the information you’ve gathered thus far before proceeding with developing and testing your API integration. Coming up with effective error handling and monitoring processes should be part of your API integration strategy. And, it goes without saying, your API integrations should always be built with scalability in mind.

Common API integration challenges

• Complexity: Technical complexity is a major hurdle, especially if multiple APIs are being integrated. While hiring an expert developer is the best way to handle this challenge, it helps for businesses to broaden their technological know-how, especially regarding the latest digital tools and API Integration trends.
• Maintenance: There’s work to be done even after integration. A sustainable API programme requires regular maintenance, updates, and testing, for which business owners must deploy dedicated teams. System updates are particularly important when adding new API integrations for additional products/features as a tiny error could send all your business activities crashing.
• Incompatibility: Different APIs use different data formats and protocols, which can give rise to incompatibility issues during integration. To get around such a situation, you can use data transformation (a technique with which you can convert data between diverse formats) or an API integration tool with an in-built data converter. Incompatibility problems leading to data corruption and errors can also arise from the necessary updates you need to make to your API codes (this is called API versioning). Rigorous testing at the time of API development can lower this risk to a great extent.

• Cost and time commitments: API integrations can take weeks or even months to complete and require hefty upfront expenses. Such time and cost commitments can be a burden if a company’s existing systems cannot adequately support the API connection. It is critical to consider the time and money factors and assess if the API integration will have the desired effect of lowering operating costs and earning a quick return on interest.

Don’t miss Aspire’s API offerings

At Aspire, we believe in seamless business management with the help of APIs. With our payment APIs, you can automate payments directly from your Aspire multi-currency account and make more payment options available to your customers through our payment gateway API solution. Our card issuance API allows you to issue unlimited virtual cards with customisable spend controls. And, of course, all our API solutions are built to seamlessly integrate with your accounting systems.