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What Are APIs
Application programming interfaces, or APIs, function as the connective tissue for many businesses’ various databases and software. In the same way that a user interface (UI) supports communication between a person and a software application, an API enables the communication between two otherwise disparate software applications.
The easiest way to explain how an API function is with an example. Early on in the lifespan of Google Maps, they implemented an API that facilitated communication between it (software A) and a real estate company’s database of home locations (software B). This additional functionality benefited both parties by increasing Google Maps’ popularity and giving the real estate company access to a new audience of potential customers that they otherwise would never have had access to.
Why Are They Valuable
As previously stated, APIs function as the connective tissue between softwares or databases. They aren’t revenue drivers themselves but rather reduce operation costs by automating or streamlining different tasks. But APIs can also benefit businesses in a few other creative ways.
Firstly, they can help businesses connect with new potential customers, as mentioned in the Google Maps example. An effective API can give customers a new means of connecting with customers and a new reason to connect with businesses. APIs can also build bridges between businesses and industries that would have been otherwise isolated from each other. This will, in turn, spur innovation and collaboration between these industries.
APIs can also streamline a business’s operations. Take the hypothetical example of an automotive insurance company. Employees in the claims department of this company would have to access a lot of information manually. For example, they would need to view details of the customer’s policy and note the details of the incident before they could decide on the next best steps of operation. An effective API could enable their claims department to access all necessary information to handle a claim easily. Of course, this will make the process much quicker, but it would also help the employee complete the process with fewer mistakes.
Challenges and Benefits
The primary challenge of implementing modern APIs is a business’s reliance on older databases and software applications that struggle to work with APIs effectively. Over time, companies may come to rely upon so many different applications that they view connecting them with a network of APIs as too much of an investment. Many companies attempt to solve these challenges with point-to-point solutions that connect two specific applications, but these solutions are far from permanent. Moreover, as more and more of these point-to-point solutions are integrated, the more likely it is that the entire system will become fragile.
For example, shipping APIs connect databases like a warehouse’s inventory to other databases like shipping truck schedules to streamline the overall shipping process. But if instead of updating these old, inefficient databases to be effectively connected with a modern API, a company decided to build a custom API that catered to these legacy systems, there would be issues over time. As the company attempted to integrate new connections, the previous API could cease to work and cause the entire system to fail.
Examples of Useful APIs
- PayPal
Pay with PayPal is one of the most commonly used APIs in the eCommerce industry. PayPal allows users to connect their personal financial information and other banking information to a PayPal account used to complete safe transactions. These transactions are so secure because they are encrypted, meaning only your bank and the company you are doing business with are capable of viewing relevant information.
- Google Maps API
You have likely used the Google Maps API without even realizing it. It allows Google Maps nearly limitless geographic information to be displayed directly on your screen through the search engine without opening the Maps app. For example, anytime you have searched for “restaurants nearby” and been shown active Google Maps results without having to be redirected to the application, you’ve interacted with the Google Maps API.
- Automatic Logins
Automatic logins are another example of an API that we take for granted. Anytime you have created an account for a third-party service using the “sign in with Facebook/Google” option, you’ve interacted with this API.
