What is the API economy?

The API economy enables businesses to rapidly transform into a digital platform that delivers value to their customers.

In recent years, the APIs (application programming interfaces) APIs have become a valuable tool for all types of businesses. APIs can save significant time and money in developing the technology needed for a business, as they provide access to specialized information, procedures, or functionalities. This prevents developers from having to program a platform from scratch.

According to the book The API Economy (2015), Salesforce and eBay have been allowing access to their APIs since 2000. However, there have been other efforts to connect different services. Back in 2015, APIhound estimated that there were more than 50,000 public web APIs. This was undoubtedly an exponential growth, giving rise to the so-called API economy. 

What is the API economy?

According to Kristin R. Moyer, vice president and analyst at Gartner (2016): “The API economy is an enabler for turning a company or organization into a platform. Platforms multiply value creation by allowing commercial ecosystems inside and outside the company to consume commonality among users. They also facilitate the creation or exchange of goods, services, and social currency; in this way, all participants capture value.”

In other words, the API economy is a system that allows Offer products and services as well as a better customer experience through APIs, which facilitates and inspires the creation of new business models.

A very simple example of how the API economy works is Uber. We know that this platform operates in different cities around the world. Thanks to the Google Maps API, Uber was able to add maps to its platform without having to develop them. This saved it effort and resources on an essential element for mapping its travel routes. This allowed Uber to rapidly expand its business across diverse geographies.

This also applies to other sectors. Even large global banks, as well as payment processing companies, lenders, fintech companies, and other types of financial institutions, are already using various Financial APIs to gain a more complete view of your customers' financial information.

So, The goal of the API economy is to facilitate the creation of solutions that contribute to a business's objectives. to improve the performance of its human and technical resources.

Benefits of the API economy

The API economy enables businesses to rapidly transform into a digital platform with diverse functionalities to scale and increase their results. Some of the benefits the API economy offers include:

• Better customer experience: Having proven digital processes makes it easier to use a platform.
• Continuous innovation: Through an API, you get instant updates, but you can also work hand in hand with developers to constantly innovate.
• Increased efficiency: API developers are increasingly specializing in their products to make them efficient and easy to use.
• Speed: With APIs, you can integrate third-party services into your platforms in a matter of days. As a result, it's faster to build products and launch them to market, achieving rapid returns.

Disadvantages of the API economy

While the API economy has many advantages, it also has some risks, such as:

• Hacks: Since information is exchanged through APIs, criminals can exploit API vulnerabilities to steal data. Consequently, it's very important for the provider to maintain high levels of security, otherwise sensitive information could be leaked.
• Data Hostage: Data custodians may dictate rules that limit functionality for companies that rely on their APIs. Therefore, to the extent possible, it's a good idea to ensure that data collected through various APIs is under your control. 

In conclusion, the API economy allows companies to leverage an already developed infrastructure. The great advantage of the API economy is that it helps accelerate innovation, generate digital business models, and add value to their products or services.

However, it is also important to consider the risks involved. Consequently, it is necessary Implement policies that ensure solutions are ethical, reliable, secure, and compliant.