Banking APIs provide versatile, affordable, and speedy banking to users all over the world. But financial transactions require that banking information, personal identities, and business and personal bank accounts are protected. With any banking API, account verification or ID verification is usually required in order to confirm that the financial transaction is secured, authorized, and protected.
So how can a powerful little API like Sila provide account and identity verification?
Through third-party authentication, Sila API can easily provide compliance-as-a-service, giving a business or startup immediate go-to-market verification processes that don’t pose as much risk. It also ensures ACH transactions, Sila transactions, and other banking transactions made using the Sila API are completely secure.
Importance of API Security for Sila
APIs, or application programming interfaces, are single communication codes that transfer messages and data to a select endpoint. Since APIs can only talk to certain endpoints, they carry a level of authorization that is extremely secure. However, a broken web API, or an exposed or hacked API is still a possibility and they are the reason for some of the world’s biggest data breaches. This is why API security is Sila’s top priority.
Luckily, the use of an API for banking transactions makes intuitive sense. APIs, such as a REST API, are built with security in mind. Therefore, APIs provide a natural security option for sensitive banking information. Secure API design principles include OAuth and OpenID Connect, an authorization server, the private key for the API, allowing permissions when absolutely necessary, and revoking permissions when it is no longer needed.
APIs also are designed with fail-safe defaults that automatically deny access until a user requests permission. This is why they are a great idea for financial services. Because a lot of important information can be carried across an API, like sensitive personal, financial, and medical data, security becomes paramount. This is where the API secure networks are clutch.
Since Sila is an ACH processor and is compatible as a stablecoin, security is improved 10x through this service. This is not to say that API security is not as important; in fact, it is even more important because, without it, nefarious actors could gain access to the crypto private keys and make fraudulent purchases at a verified blockchain address.
However, with the implementation of our patented SILAUSD stablecoin, Sila users have added peace of mind of having their transactions securely posted to a blockchain address.
How the Sila API Verifies Accounts and Identities
Sila’s API verifies both personal identity and account identity through a third-party authentication method that is ready-made and built into the API code.
Accounts and identities for both customers (Know Your Customer; KYC) and businesses (Know Your Business; KYB) can be checked and verified through the Sila API with a simple endpoint, which connects to the third-party identity provider Alloy.
Once a user creates a handle, they are then able to fill in the requisite form (which requires authsignature and usersignature).
From the developers standpoint, standard account verification for businesses looks something like this:
- The business chooses the business type from the /get_business_types endpoint and registers for a valid NAICS code from /get_naics_categories endpoint. Then register the business with this data at /register endpoint.
- Separately register individuals who are controlling officers, beneficial owners, and/or “administrators” who will serve to certify that business data and ownership stakes are correct. Then get business members to register from the /get_business_roles endpoint.
- Link all required business members with the /link_business_member endpoint. Unlink any business members where needed with the /unlink_business_member endpoint.
- Request KYC for the business with the /request_kyc endpoint. Linked individuals will automatically go through individual KYC when this is done.
- Check KYC with the /check_kyc endpoint until verified.
- If a business needs certification, get a list of members needing certification from /check_kyc (could be 0 if there are no beneficial owners). If a business does not require certification, it can skip the remaining steps and transact immediately.
- For each beneficial owner requiring certification, check the /get_entity endpoint’s response and get a certification token. Pass this certification token received from /get_entity response to the /certify_beneficial_owner endpoint.
- When all beneficial owners are certified, call the /certify_business endpoint.
Verifying and checking bank accounts and digital identity is simple with these endpoints and commands. Troubleshooting may be requested, and that can easily be done through our provided Sandbox.
Challenges Faced by the Sila API Verification Processes for Accounts and Identities
All banking APIs face challenges in determining bank account and identity verification. However, Sila’s connected app Alloy allows for startups, businesses, and small businesses to integrate a white-labeled, third-party and totally compliant customer and account verification as a payment system. Without this, it would take months, even years, for a business to become fully compliant to process payments natively.
Naturally, presenting such a nuanced and niche integrative process presents its own challenges. However, through Sila’s unique partnership with Alloy, users are allowed to create their banking API platform or app and get it compliant faster than ever.
This biggest challenge for Sila’s API verification process is ensuring that KYC/KYB is followed. Since KYC/KYB identity governance is required in the U.S. and for most financial institutions throughout the world, a banking app like Sila must streamline the troubleshooting and verification checks, and make sure that each user stays compliant when using Sila. Sila is not liable for users who find ways to circumvent the KYC/KYB process included in the code and code testing, but there is additional risk in letting a business and its own team of developers the opportunity to create a Sila-run API.
One big challenge is the changing jurisdictions that differ between states and nations. Sila’s API allows users to transfer money cross-borders within the U.S. and into the U.S. Therefore, maintaining account and identity compliance can be challenging and constant; this app is navigating international financial networks and international payment systems each has their own set of restrictions (which vary from country to country, and jurisdiction to jurisdiction).
Furthermore, like all financial transactions banking APIs are still susceptible to nefarious activity. If a Sila-owned web API was used to participate in illegal activity, say to launder money through an offshore bank account, then that puts the onus on Sila as a company to mitigate this incident with the user, assess the risk factors, and further protect the rest of its users.
This risk is entirely possible, and could also cause problems for Sila and financial institutions alike, as many companies have been fined millions of dollars for letting criminal activity like this continue.
Best Practices for Banking API Security
By and large, one of the ways that the Sila API succeeds is that it removes manual processes in account and identity verification and instead implements automated technology and secure verification APIs. By outsourcing these processes to a third-party, through a secure API endpoint, SILA is able to provide a highly secure verification process for a fraction of the cost.
Furthermore, the web API endpoints are securely linked to only Alloy endpoint, which is then able to securely seek identity verification information; this adds another layer of data protection. Responses are sent back through that one endpoint as well. So in keeping with API security, developers and businesses are able to rely on a single API (Sila’s) for even the transfer of highly sensitive personal information.
The Sila API is an extremely secure option within banking systems because of its use of the API security. There is only one private API key that is needed for accessing the API. Furthermore, the API runs using the SIla token, our own patented cryptocurrency, which adds another layer of protection.
For any banking API, it’s essential that standard security processes are followed. The API is required to be run in an HTTPs, and user authentication and data encryption are also necessary to ensure that the API data and access points are fully secured.
Since businesses will be offloading the bulk of data to Sila and Sila partners, they do not have to worry about storing any PCI-SSD secured hardware. Instead, businesses and fintech startups can rely on the durability and security of Sila, their one main touchpoint, to keep all of their endpoints protected.