What is API economy and how it impacts businesses?

Nick Perzhanovskiy
Nick Perzhanovskiy Business Development Manager
8 minutes to read
api economy and how it impacts digital services

Sign up with Google or pay via PayPal — you see these options in almost any app. They’re so ordinary that we don’t even think about what’s under the hood.

APIs or Application Programming Interfaces are those bricks helping your fav taxi booking app or shopping platform satisfy your needs.

Today organizations realize they can no longer compete on their own. More and more they rely on each other and share unique data and capabilities.

APIs are bridges helping them to do so. 

Almost any service provider including Uber, Airbnb, PayPal have multiple APIs integrated into the app’s native architecture. Some companies become APIs providers and let others connect to their database free of charge or for money.

We've integrated digital solutions with hundreds of various APIs that bring extra functionality and convenience to users. Consult with our tech team if you need any sort of integration!
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The plethora of APIs available creates a large API ecosystem.

What’s this, how it works and what are the benefits of API economy? Keep reading to get the answers.

What is the API economy?

According to Deloitte, APIs are not an innovation, they have been here since the times of basic interoperability. 

In 1960-1980 they existed in the form of simple interconnect between network protocols. The techniques used back then were ARPANET, ATTP and TCP sessions.

Modern API tools started developing in the early 2000s, and they are way more sophisticated.

Integration as a service, RESTful APIs and cloud orchestration are at their core.

Put simply, APIs are software intermediaries that enable applications to interact with each other. An API can be a web-based system, database system, etc.

Look at online crowdfunding platforms. They are complex systems with numerous business flows like user onboarding, KYC and AML checks, contract signing, e-wallets, online payments, etc.

If you engineer a similar platform from scratch, you may need a hell of a lot of time and resources.

Fortunately, there’s a way out — connect it with Lemonway payment gateway for payments and CDD checks, integrate DocuSign for e-signatures… and celebrate the fast launch!

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Growth of the API economy in numbers

The transformation of APIs from the development technique to a business model has led to the growth of the API economy, the commercial exchange of third-party APIs.

There are other API economy definitions:

  • APIs and their resource management;
  • connection and communication of microservices;
  • the game changer for businesses helping them accelerate fast and become B2B API providers. 

This phenomenon drew the attention of not only tech specialists but top managers seeking new partnership opportunities.  

A myriad of APIs over there making up several clusters:

  • API as a product/transactional APIs (SMS/Voice, payment, accounting)
  • API lifecycle platforms (API documentation, testing, management);
  • backend building tools/MBaaS;
  • API Abstraction/Integration platforms (Horizontal, vertical, automation).     

A food delivery app, for example, might have a mapping API, communication API, and billing API, each from different providers, hidden under the app UX. 

The API industry in numbers:

  • the majority of people dealing with APIs are developers who work in agile development (42,6%), microservices (34,3%), API/tech support (31,1%);
  • most of the time devs spend on API development (36,1%), debugging and testing take (22,2%);
  • 49% of respondents say their APIs are not changed regularly vs. 28% admitted their APIs broke or changed monthly;
  • language is the most relevant form of APIs used by global AI and machine learning developers as of 2019. Then comes speech, vision, and data discovery.

Benefits of the API economy explained

APIs are not just a means of sharing data; they give companies access to critical data, open up new markets and provide grounds for partnership.

Plus, with APIs brands can differentiate themselves among the competition. They help create a “digital image” in front of users.

APIs benefit both companies-users and providers. Let’s see how. 

Financial effects of APIs on businesses

Releasing APIs as software, companies transform their products into a platform. Comparing with new product/service projects, this pattern is more attractive to stakeholders and investors.

No need to invest crazy money in marketing and research. It’s better to become a supplier for others and get 90% revenue from APIs like Expedia.

Users are also in a win-win situation: API usage greatly decreases development costs and broaden opportunities for scaling up.

Reconsidering partnerships

Unlike it was in the past, agents in the API economy don’t need to dive into extensive negotiation and customize information systems. Typically, providers have API Terms of Use defining the abilities and limitations for users.

API onboarding is quite simple. Best practices include documentation, examples, and sandbox.

For providers, APIs a great opportunity to attract new clients. Companies-users can focus on business strategy having a feasible tool at hand. APIs open the Internet of Things (IoT) for smaller players who can’t build extra functionality in-house.

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Source: BBVA


Flexibility and automation

By integrating third-party tools via APIs, companies take some burden off the staff’s shoulders. Flows are put on the pilot and tasks are completed faster, which leads to better efficiency and customer satisfaction. Data received via APIs help merchants predict changes in user patterns and behaviour and remain flexible. For API providers, there are chances to enter new markets that are not related to their core domain.

Faster time to market

You’ve got a great product idea and little time to implement it. Competitors are stepping on your toes and in a day or so you may see a new feature added to their product portfolio.

APIs are exactly what you need to build an MVP. The main task here is to find a competent tech partner with a background in customising APIs. 

Need fast MVP development services? We launched several MVPs this year. Let's talk about yours!
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Risks of the API economy

APIs are not all roses, there are a couple of challenges you may face.

  1. Performance. As an API consumer, you’re highly dependent on the external service. In case of interruptions your own app risk breaking down.
  2. Security. For API providers, there’s a higher risk of attacks to their website or platform. There will always be bad actors to use APIs for data abuse.
  3. Access limitations. This is the aggregator who dictates the terms of data access and API usage. It may happen that changes in API Terms of use don’t align your product strategy and goals.
  4. Cost. Planning to release API software? Be ready to spend a fortune on its development, maintenance and client support. It’s critical to be sure that the game is worth your money.
  5. Trade-off. It’s a big deal to find the right API. Since there’s no direct communication between providers and users, the second may face the problem of choosing. Always think about users: if you decide to withdraw an API from your platform, it may be painful for them.

The future of the API economy

Deloitte and IBM have shared their insight on current  and future API trends:

  • API suppliers are shifting the focus of their strategies to API management and productization;
  • more attention to the “look and feel” of APIs;
  • governmental sectors worldwide are unleashing the potential o APIs;
  • the Internet of Things is adopting by new players at breakneck speed through APIs;
  • APIs are to become digital channels to distribute access to IP, assets and goods;
  • legal and regulatory rulings concerning API protection are to be developed;
  • the global marketplace to trade and settle APIs is under development.
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Rakuten API Marketplace

Other positive changes on the landscape include API deployment for emerging tech, AI & ML usage for building APIs, data visualization.

Our contribution to the development of the API economy

If you’ve dropped by accidentally, let us tell you who we are and what we do.

We are a web development company, whose portfolio covers a variety of domains and industries, with a particular focus on FinTech & Crowdfunding solutions.

FinTech, online investment, real estate, travel and hospitality — we help startups and mature businesses from these and other industries to kick-start and mature.

We elevate websites and mobile apps from ground zero and update/redesign existing products. Every second project is a complex system that calls for wise solutions, in particular integration with third-party tools.

To embed payment solutions, due diligence checks, e-signature tools, we use APIs. In doing so, we’re able to cut the development cycle and meet the project budget.

Here’s a glimpse of what we integrated our projects with.

1. Google API for Archello

Archello is a social platform for designers and architects. It’s also one of our favourite clients with whom we’ve maintained a long-term partnership! At Archello, you can find visionaries of everything that surround us: from furniture pieces to buildings and cities.

archello-social-platform-for-designers-and-architects-640x470 What is API economy and how it impacts businesses?

Initially, Archello was built on Drupal 6. When we took up the project, we decided to rebuild the website with Yii 2 PHP since Drupal 6 wasn’t supported by its community any more.

A new website has better performance, the sleek look and new platform architecture. Among the rest of technologies, we deployed Google API for Google Maps, Place Autocomplete, ReCaptcha and video APIs for Youtube and Vimeo.

Learn more about Archello.

2. GSMA and its Mobile Money API

A unique project with a great social incentive — to overcome “financial exclusion” in emerging markets.

GSMA, a representative of the interests of mobile operators, software companies, equipment providers and internet businesses is developing a  money interoperability ecosystem.

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The main goal of the project is to interconnect mobile operators and their technology platforms. In this case, users will be able to send and receive money off-line via the mobile network.

To enable interoperability, GSMA created its own Mobile Money API. It’s another example of a business that became an API provider.

By pairing Mobile Money API with Mojaloop, GSMA is planning to launch an interoperable test platform where mobile providers will be able to test-drive different scenarios of money transactions.

We helped GSMA elevate an MVP with Mojaloop deployment and GSMA Mobile Money API integration. Feel free to read the case study!

3. APIs for fundraising platforms

We’ve got several clients who operate crowdfunding and online investment platforms helping startups and businesses get seed capital for the property, education and clean energy projects.

LuxuryShares, for example, is a fractional ownership investment platform that is connected to a variety of third-party services via APIs:

  • User SMS verification
  • Secure payments via MangoPay
  • Automated KYC/AML checks
  • Digital currency payments
  • Walkthrough VR tours

The bottom line

The mission of APIs has changed a lot over time – from a handy development technique to a  disruptive business model.

Any organisation has data assets to share and monetize and one of the means to do this are APIs.

Companies providers and consumers, APIs, products they’re integrated into — all this creates an API economy. The ecosystem that benefits every party. This is how the API economy impacts businesses:

  1. For consumers, smart APIs are a magic wand to build complex products faster and at a lower cost. 
  2. Providers consider API products as a new driver for revenue, wider market possibilities and new clients.
  3. Users also get perks – powerful apps to cope with a multitude of tasks.
Want to extend the functionality of your website or app with third-party tools? Get in touch, and we’ll see how we can help.
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