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What is an API? An API is a set of rules, protocols, and tools that allow different software applications to communicate and interact with each other. APIs define how different components of software systems can access and exchange data or functionality, enabling developers to integrate third-party services, access resources, or build new applications more efficiently. APIs play a crucial role in facilitating interoperability, automation, and innovation in modern software development and enabling the creation of interconnected ecosystems of applications and services.

Think of the internet as a web of connected servers.

Modern applications send and receive an unfathomable amount of data at any given time. This flow of data is powered through application programming interfaces (APIs).

What is a webhook? A webhook is a type of API, or application programming interface, which allows a given web application to send data to another application when predefined events occur. While most APIs handle two-way data exchanges between disparate software based on user requests, webhooks send data one-way when certain events occur. For example, a webhook might send the length of time a user spent on a page whenever a user leaves the page. Webhooks can also be called “web callbacks” or “HTTP Push APIs”.Developers use webhooks along with other APIs to create and manage connections between their own software and other applications. Because webhooks send data triggered by events, they are typically favored over APIs when the developer wants to accumulate data over time. By contrast, APIs tend to be more useful when developers want data sharing to occur at instances defined by user behavior. While other types of APIs make requests for data and return a result, webhooks passively wait for data events to occur.To set up a webhook, clients create a webhook URL which they provide to the webhook provider. From then on, the providing webhook sends data to that webhook URL for ingestion by the client’s application. The client’s application validates incoming webhook requests to ensure that the incoming data is from the provider and not a security threat, then receives the data.Like other APIs, the information that can be monitored and sent by a given webhook is governed and understood by both the host site and the client site via comprehensive documentation. This mutual “contract” allows both parties to protect sensitive data, as a webhook will package no more data than is necessary to fulfill the webhook owner’s desired output. In this way, neither application fully exposes its own or its users’ data.

Financial services aren’t just offered by financial services companies anymore. There are a few ways in which banks are expanding their reach by opening their systems to third parties via financial data APIs. The rise of banking as a service (BaaS) has allowed just about any company to expand its offerings to include financial products, but there are a few API-driven ways in which banks are connecting with third parties.

Software developers love building things. The better the build, the better the end product.

You cannot escape the pervasiveness of software.

Money makes the world go round, and financial institutions control how fast it spins.

This post is part of G2's 2021 digital trends series. Read more about G2’s perspective on digital transformation trends in an introduction from Michael Fauscette, G2's chief research officer and Tom Pringle, VP, market research, and additional coverage on trends identified by G2’s analysts.

If you build it, they will come.