Is your fintech or financial institution (FI) prioritizing the needs of its small and medium business (SMB) customers?
If not, it should. SMBs make up 90% of businesses and provide over half of total employment worldwide. It’s an underserved market that presents incredible opportunity in the financial services industry.
“Banks have often been reluctant to lend to SMB firms or have charged higher interest rates due to elevated credit risk profiles of SMB firms and complicated risk assessments,” write Oracle product leaders Tushar Chitra and Avanish Swamy. “Often, SMB firms are forced to seek financing from non-bank lenders, so much so that these lenders offer stiff competition in several areas of the SMB lending space. In addition, the bank–SMB relationship has also often been centered on financing, overlooking several critical aspects that help SMB firms operate profitably and grow.”
The key to maximizing the opportunity that is the SMB segment lies in that last piece of Chitra and Swamy’s commentary: enabling business profitability and growth.
The ability to access and consolidate data from various sources is crucial for these SMBs to make informed decisions and drive growth. However, the process of aggregating financial data can be complex and time-consuming.
This is where API engines—or API aggregators—come into play, serving as the backbone of data integration by enabling seamless connectivity between different systems.
API engines allow developers in the finance sector to bridge the gap between their company’s services and the financial systems of their business customers, revolutionizing the onboarding process.
But developers face a critical decision: should they build their own API engine from scratch or opt to buy a pre-built solution?
In this article, we will delve into the “build vs. buy” dilemma, exploring the pros and cons of each approach and guiding fintech developers towards a solution that simplifies and expedites their company’s ability to work with SMB customers.
Psst…We’ve answered this question for folks specifically weighing Boss Insights against a custom-built solution. Read more here: Build vs. Buy – Boss Insights
Building an API Aggregator for SMB Financial Data
Building a custom software solution is a strategy encouraged in smaller fintechs or financial institutions with fewer resources available for the purchase of a pre-built solution. And sometimes, it is objectively the right choice—but what about when it comes to an API aggregator for financial data?
3 advantages of building a custom API aggregator
1. Customization: When it comes to building any piece of software, one of the key advantages is the ability to customize the solution according to specific requirements.
Every fintech or small financial institution has unique needs and workflows when it comes to aggregating financial data—as do the businesses whose data is being aggregated. By building an API aggregator in-house, software developers have the freedom to design and fine-tune the solution to match these specific requirements. You can ensure that the aggregator integrates seamlessly with existing systems, databases, and third-party APIs used within the organization.
Customization also allows for the incorporation of specialized functionalities or business logic that cater specifically to the needs of SMB customers, enhancing the overall user experience.
2. Control: Building an API aggregator provides software developers with complete control over the development and implementation process. You have the autonomy to define the architecture, select the technologies, and establish coding standards that align with their organization’s best practices.
This control extends to the implementation timeline, allowing developers to set their own priorities and deadlines. By having control over the entire process, developers can ensure that the API aggregator is built to meet the highest standards of quality and security.
You have the freedom to optimize the performance, scalability, and reliability of the aggregator, guaranteeing a robust and efficient solution tailored to the organization’s unique requirements.
3. Flexibility: Another significant advantage of building an API aggregator is the flexibility it offers. Fintechs and small financial institutions often operate in dynamic environments that require continuous innovation and adaptation.
By building your own aggregator, you can easily iterate and add features as needed. You have the freedom to enhance the aggregator’s capabilities in response to evolving customer demands or market trends. This flexibility enables organizations to stay ahead of the competition and provide a cutting-edge solution for their SMB customers.
Moreover, building an API aggregator internally allows for quicker response times to bug fixes, feature enhancements, and regulatory changes, ensuring that the organization remains agile in a rapidly changing landscape.
3 challenges for building an API aggregator
1. Time and Resources: Building an API aggregator requires a significant investment of time and resources. Developers must allocate resources for development, testing, debugging, and ongoing maintenance and support.
This investment can divert attention and resources away from other important projects and initiatives within the organization.
2. Scalability: Building an API aggregator that can handle increasing data volumes can be a complex task. As the organization grows and more SMB customers are onboarded, the aggregator must scale accordingly to handle the influx of data. Ensuring optimal performance and reliability under high loads requires careful planning, infrastructure management, and continuous optimization.
The scalability of the solution itself isn’t the only challenge to be aware of—you’ll also need to be able to scale your ability to maintain and upgrade it as your customer roster grows.
3. Compliance: Compliance with regulatory requirements and data privacy concerns is a critical consideration when building an API aggregator. Developers must ensure that the aggregator complies with industry regulations, such as data protection laws and financial data security standards.
Adhering to these requirements involves comprehensive risk assessments, robust security measures, and ongoing monitoring and auditing processes.
Buying an API Engine for SMB Financial Data Aggregation
No doubt, buying a pre-existing solution is the easier way forward. But is it the better one?
4 benefits of purchasing an API aggregator platform
1. Time-to-Market: Purchasing an existing solution for gaining direct access to SMB customers’ financial solutions offers a significant advantage in your ability to get up and running. Instead of investing considerable time in building and fine-tuning an API aggregator from scratch, organizations can quickly deploy the purchased solution and start leveraging its capabilities. This accelerated deployment allows financial institutions and fintechs to reduce the time it takes to connect with SMB customers and provide them with seamless access to their financial data.
2. Established Infrastructure: By buying an existing solution, organizations can leverage an established infrastructure that has been proven and refined over time.
These solutions typically come with a solid foundation that has been thoroughly tested and optimized for performance, scalability, and security. By using a proven and reliable solution, financial institutions and fintechs can mitigate the risks and uncertainties associated with developing an API aggregator in-house. They can rely on the vendor’s expertise and experience to ensure a stable and robust infrastructure that can handle the demands of SMB customers’ financial data.
3. Ready-made Features: Purchasing a solution provides access to a range of pre-built functionalities and integrations. These ready-made features can significantly accelerate the development process and enhance the overall functionality of the API aggregator.
With pre-built functionalities such as data parsing, categorization, and analytics, organizations can quickly offer valuable insights to their SMB customers without investing additional time and effort. Furthermore, pre-built integrations with various financial systems, such as accounting software or payment processors, allow for seamless data synchronization, providing a comprehensive and cohesive experience for SMB customers.
4. Support and Maintenance: Opting for a purchased solution ensures ongoing support and maintenance from the vendor. This means that organizations can rely on the vendor’s expertise to handle any technical issues, bug fixes, and updates. Regular updates and improvements provided by the vendor help organizations stay up-to-date with evolving industry standards and regulatory requirements.
Read more: How Access to Small Business Data Helps Your FI & SMB Customers Succeed
3 drawbacks of buying an API aggregator platform
1. Cost: One of the challenges of buying a solution for gaining direct access to SMB customers’ financial solutions is the initial investment and licensing fees associated with the purchase.
Depending on the vendor and the features included in the solution, the upfront cost can be a significant consideration for financial institutions and fintechs. It’s crucial to carefully evaluate the pricing model and determine the long-term viability and return on investment of the solution before committing to the purchase.
2. Customization Limitations: While pre-built solutions offer a range of functionalities, they may not align perfectly with the unique requirements and workflows of every organization. Financial institutions and fintechs may find themselves constrained by the features and configurations provided by the vendor, potentially hindering their ability to tailor the solution precisely to their specific needs.
3. Vendor Dependency: Buying a solution means relying on the vendor’s development roadmap for future updates, enhancements, and feature releases. Organizations become dependent on the vendor’s ability to deliver timely updates and align with their evolving business needs. If the vendor’s roadmap does not align with the organization’s priorities or fails to address crucial functionalities, it can create challenges and limitations for long-term growth and adaptability.
So, What’s Better—Build vs. Buy API Engine?
Certainly, both options have their pros and cons. But, one point stands out more than others—long-term scalability.
Building software isn’t a one-and-done kind of project. As your customer base grows, you’ll need to continue iterating on your API aggregator to support more connections. Plus, the ongoing maintenance and bug fixes any software requires.
Interested in buying an API engine to aggregate your business customers’ financial data? Fill out the form below to learn more about Boss Insights’ solution.