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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.

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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.

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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]

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