2 min read

What is the best way to exchange data in the banking industry?



As financial technology continues to evolve and mature, the need to share data across technology partners is increasing. There are two types of integration commonly used to share data: File Exchange and API. This blog post will explain these two types of integration and highlight the strengths and weaknesses of both.


File Exchange

File exchange is the process of sharing information by sending and/or receiving files containing financial data to be processed.  Data in the file can be organized in various ways: using a custom format, using an existing standard (FRB or MT103) or using an existing data exchange format such as JSON, XML or CSV with a published schema describing the structure of the data.


File Exchange Strengths

Many legacy systems have the capability of generating files containing the necessary financial data and only require a file mover to enable data sharing. Files are easily exchanged using existing secure file transfer protocols such as SFTP or HTTPS.


File Exchange Weaknesses

Data is exchanged in an asynchronous manner requiring batch processes to both move and process the files. This is not ideal in a real-time system where immediate processing and feedback is necessary. For example, when a bank teller is interacting with a client to perform a foreign currency exchange, the client expects immediate feedback regarding the status of the transaction and the ability to resolve any data validation issues that may arise. File mover systems that facilitate exchange are often fragile in practice, and when they break, the issue is not typically detected in a timely manner since neither system interacts directly with each other.



API integration allows data to be programmatically exchanged in real-time using a secure connection. Most modern APIs are implemented as Web Services which are similar to Websites but exchange data instead of visual content. Communication is secured by using a combination of authentication and secure transfer protocols such as HTTPS.


API Strengths

API integration allows for real-time interaction between partner applications. Standards exist for documenting APIs that allow both humans and computers to discover and understand the capabilities of the service. API integration is ideal for supporting business processes that involve direct interaction with clients. Feedback to an API method invocation can be reliably communicated through either a direct response to a synchronous call or through a publish/subscribe model allowing corrective action to be taken if necessary. 


API Weaknesses

API-based integration can be difficult to implement in legacy systems that were not architected to support it. This can result in expensive custom development work and lengthy development cycles. 



The choice between File Exchange and API integration is largely dependent on the capabilities of your current systems and the target service. 

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