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What Are APIs and How Do They Work?

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 A man stands behind a worn wooden checkout desk and leans forward to type on a small laptop. The man has short brown hair and wears a pale blue button-up shirt and khakis. He is smiling at whatever he sees on the laptop's screen. Behind him is a wall of hardware store merchandise, including coiled and uncoiled metal tubes, various sized bottles of glue, and small items individually wrapped in plastic. A spinning stand holding similar items sits on top of the checkout counter.

You can find APIs all over the place in your business, including in customer payment platforms, data collection for marketing, and inventory management systems. — Getty Images/mixetto

If you’re not a developer, you probably haven’t given much thought to APIs, but they represent a huge opportunity for growing businesses. API integrations make it possible to automate different parts of your business and create a customized solution. Let’s look at APIs, how they work, and the benefits of using them.

[Read more: Emerging Small Business Tech Tools]

What are APIs?

An application programming interface (API) is a messaging format that allows two software applications to work together using certain protocols. For example, let’s say you use a site like Travelocity to aggregate airline prices. Travel service providers offer APIs that allow these websites to access real-time information about flight and hotel availability. Travelocity is the middleman between you and the travel service provider.

However, the API integration is what ensures the information you receive is accurate and up-to-date. APIs allow these two different systems to work together in a flexible and efficient way.

Types of APIs

Here are the most common types of APIs you’ll encounter:

  • Open APIs: Open APIs are available to the public and
    can be used by anyone. They typically provide access to a product or
    service, and anyone who agrees to the terms of use can access it.
  • Private APIs: Private APIs are internal and only
    available for use within a certain organization. They’re designed to
    improve the functionality of different systems within that company and
    aren’t available to the public.
  • Partner APIs: Partner APIs can only be accessed by certain developers and business partners.
  • Composite APIs: Composite APIs combine multiple APIs into one single interface.

APIs can automate routine business tasks, like data entry, invoicing, or updating inventory.

How are APIs used?

Here’s an overview of some ways APIs allow two different software applications to work together:

  • Communication: APIs allow different software
    applications to communicate with one another. For example, when you open
    your weather app, an API allows the app to retrieve real-time
    information about the weather in your location.
  • Data sharing: APIs allow access to private data sources
    and allow users to retrieve data from different applications. For
    example, when you open a social media app on your phone, an API
    integration lets you see another user’s feed.
  • Cloud computing: APIs also allow software applications
    to interact with cloud services. They allow you to manage your storage
    and access other cloud services.
  • Internet of Things (IoT): APIs play an important role
    in connecting IoT devices by allowing different devices to communicate
    and share information, improving your devices’ effectiveness.

[Read more: Best APIs for Video Conferencing]

Benefits of APIs for small businesses

APIs can help your business become more innovative and efficient and provide better customer service. Here are the biggest benefits of APIs for small businesses:

  • Lower costs: APIs allow you to access and integrate
    existing software applications directly into your system. For example,
    payment processors like Stripe allow you to accept customer payments
    without developing your own solution. And because the software is
    intuitive and easy to use, you don’t have to pay for specialized staff
    to manage it.
  • Improved productivity: APIs can automate routine
    business tasks, like data entry, invoicing, or updating inventory.
    Automating these processes reduces the likelihood of human error,
    freeing up your time to focus on more important aspects of your company.
  • Better customer experience: APIs can help you gather
    more data about your customers and create a more personalized
    experience. Gathering more information about your customer’s habits and
    preferences allows you to offer tailored promotions and recommendations.
    APIs also ensure you’re providing your customers with up-to-date
    information on pricing and inventory availability.
  • Scalability: APIs make it easier to scale your
    business’s operations. You’ll be better equipped to meet the growing
    demand for your company’s products and services without reducing the
    quality.

[Read more: How Chatbots Can Help Grow Your Small Business]

CO— aims to bring you inspiration from leading respected experts.
However, before making any business decision, you should consult a
professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

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Jamie Johnson

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