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On average, it costs US 20,000 USD to build an application programming interface (API), and does not include maintenance costs. But hopefully – those who promote their APIs as products and develop a partnership ecosystem around initial financial investments are more likely to reap the maximum returns.
By viewing APIs as assets, more IT decision makers are looking at the value of API management as a way to monetize APIs. These resilient and secure digital architectures will be critical to empowering API-led connectivity, which is one reason why the size of the API management market is expected to reach $ 5.1 billion by 2023.
As both internal and external APIs become key factors for companies’ economic growth, how can CIOs and CTOs use collaboration to create effective API monetization strategies?
Identify your assets
It’s hard to highlight everything as an API, so take a closer look at what you’re eating from the inside can be useful from the outside. Global IT costs are set to grow 5% year-on-year, and companies delivering software-as-a-service (SaaS) by externalizing the API will be a big part of this expansion. You may have resources for monetization without knowing it.
Google Maps and Uber are excellent examples of the effectiveness of collaboration on a scale and how to take advantage of API externally. Google was able to take advantage of its existing Maps feature and expose it to multiple providers, including Uber. Although Uber experimented with other map providers, it always chose to switch back to Google’s API, and then launched its own Uber API for adoption.
Many other companies have learned the benefits of saving costs and time by partnering with third-party APIs rather than building their own. In fact, according to the Q3 2021 Developer Nation Global Survey, 68% of developers are already using third-party APIs.
This top-down strategy for API monetization looks at what is already in use and then identifies microservices that can be repackaged for external partners. It starts with having an API management platform with a clear cross-organizational overview of who is using which API and how.
Every industry is prone to disruption, especially when tech is involved. The relationship between banks and fintech is an excellent example of how technology can innovate, but traditional institutions still retain a large share of customer confidence.
While fintech companies can reduce fees and reduce the bureaucracy associated with brick-and-mortar banks, they may lack the government-backed rules and certifications of established financial institutions. The question is: How can you take the bank’s capabilities and use the API to build in a way that meets customer demand for speed, improves efficiency and creates a better user experience?
Banking is a tough industry that has been interrupted with new players like Neobank and Fintech using open banking and PSD2 directives that require an open API. Traditional banks can take advantage of this API-supported partnership to become more competitive and provide faster services to customers. Leading with the API-first design approach they can move away from the old architecture and form monetization strategies that are more agile in responding to customer needs.
In today’s competitive global market, cross-collaboration is essential for the survival of the trade because there is no winner-take-all scenario.
Prepare your product
Any API monetization strategy needs to be centered around the design-first idea. Determining what your API will be and for whom will help determine the specifics of how you will document and ultimately release your API. Getting your design right in the beginning means you will have a stronger product, be more resilient to industry challenges and have a better chance of successful API monetization.
In general, behavior-based development is the best way to start this so that you are modeling technology after user experience. For example, imagine a typical ecommerce workflow:
- Browse or search categories
- Add to basket
- Login or register for the first time
- Add shipping information
- Receive trackable order ID
Each of these steps involves an API. Therefore, using an external API partnership – such as with Shopify, Stripe or PayPal for the payment side, and Google Maps for tracking – helps everyone reduce costs dramatically compared to internally produced.
Since API monetization naturally lends data, decisions need to be made as early as possible to determine the risks from who you are and who you might expose. The distributed nature of the API naturally expands your attack surface. API attacks increased by 681%, with 95% surveying in 2021 stating that they have been subject to API attacks in the last 12 months. For those looking to enter the API economy, rigorous testing is required to ensure that consumers can trust a safe and secure API.
Testing is also a way to ensure that your technology’s API backbone meets industry standards and stays consistent. The API management platform means that developers can easily automate testing. Low-code platforms also allow developers to simulate and mock the API without having to write new code, making it easier to get feedback early on before they launch the API.
Standard documentation with API design templates by platform allows you to set benchmarks across the company for quality, safety and compliance levels. Design templates for documentation further enable the adoption of the ‘self-service’ approach to APIs, which makes it easier to scale your product services and reduces the need for customer support.
Select your API monetization model
Finding ways to monetize the API is still relatively new and there is no right way to do it. If you feel your API and data are ready to be exposed, the next step is to choose a public or partnership model. While the Public API is available to anyone who adheres to your terms and may mean more adoption, the Partnership API is only open to strategic business partners with whom you can build trusting relationships.
How you choose to enter the API economy will depend entirely on the product on offer and the model you choose for scaling and selling that product. Most organizations will launch their API monetization strategy with just a few partners to test the process and see if the data they are exposing is demanding.
In the case of ride-sharing apps, for example, insurance can benefit both drivers and passengers, but there are many ways to sell it. Perhaps the insurer will charge per ride / driver / vehicle or pass the cost as an optional surcharge for the customer. Monetization needs to be carefully calculated to make sure you decide how to charge for your API usage and that there is no overhead for the partnership.
Remembering that there is no one-size-fits-all-business model for staying open and engaging in the API economy will put businesses in the best position. Monetization strategies with cross-collaboration at their core will see the best returns as they start with API as a product and develop a partnership ecosystem around that initial investment.
Darshan Shivshankar is the co-founder of APVIS,
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