How to Optimize the Cost of FinTech APIs

A business-conscious developer's guide.

Funding to FinTech companies has fallen off a cliff since 2021 since money is no longer free. Despite this, industry revenues have grown nicely – 14%+ annually, showing strong customer demand for innovative FinTech products, even as investors become more conservative.

We’re in a new era where FinTech companies need to be able to control their own destinies to survive. That means having great unit economics and being able to generate enough profit per customer to organically fund growth and provide flexibility to delay fundraising activities. 

Management's first instinct when trying to improve unit economics might be to raise prices, but with new challengers ready to undercut on price, this can be risky. Improving cost management should be considered a ‘must do’. One of the best places to look for low risk-high reward cost savings are third-party APIs, especially those used in KYC and underwriting. In this post, we’ll share some best practices we’ve learned in the field that can help you eliminate waste and improve the efficacy of your third-party APIs. 

Start with Instrumentation

You can’t manage what you don’t measure. Putting cost instrumentation in place is a ‘no brainer’ for anyone serious about improving their unit economics. A few things to keep in mind:

• Instrumentation needs to evolve with your app: As you scale and add new features, your API usage patterns will change. Regularly review and update your instrumentation configurations to reflect these changes. For example, if you integrate a new third-party service or expand an existing one to new parts of your application, ensure that your monitoring setup includes these updates.

• Pricing is rarely a simple ‘per request’: Many APIs have complex pricing structures that go beyond a straightforward per-call charge. If you want accurate instrumentation, you need to understand the nuances of your vendors' pricing models, which may include tiered pricing, rebates, and charges based on the complexity of requests. 

• Successful request != useful response: Sometimes, you get billed for requests that provide no useful information due to lack of coverage for that customer demographic or ‘one-off’ data quality issues. Track the quality of the responses you receive so you know when this happens and can take action. 

By keeping these points in mind and implementing robust cost instrumentation, you'll gain the insights needed to optimize your API usage and improve your unit economics.

Eliminate Unnecessary Spend

Cutting costs doesn’t have to be painful if you focus on eliminating waste. Here are some quick wins that help your bottom line immediately:

• Sunset or supplement endpoints with poor data quality: If certain endpoints consistently return unreliable or incomplete data, consider getting rid of them or onboarding another vendor to run in parallel. Vendors charge the same for good and bad data; it’s your responsibility to minimize spend on unusable data. 

• Remove inactive users: Solid monitoring provides insights into where your requests are coming from. Use this data to identify and remove inactive users. Many API services charge based on the number of users or accounts, so keeping your user list clean can significantly reduce costs.

• Implement caching: This is especially useful for scenarios where rejected customers retry their application. Instead of hitting the API every time a customer re-applies, cache the rejection result for a certain period. This way, you avoid repetitive API calls for the same data, reducing costs and improving response times for your users. Just be sure to read the TOS of your vendor beforehand to know what’s allowed. 

• Set thresholds and alerts on usage, especially when it's internal: This is particularly crucial for internal applications, where unmonitored activities can generate high API usage. For instance, if an internal tool starts making excessive requests due to a bug or an unexpected use case, an alert system will notify you immediately, allowing you to take corrective action before costs spiral out of control.

These tactics should be considered a ‘no brainer’ since they can give your unit economics a nice improvement without needing to make any hard decisions.

Get more bang for your buck

Improving unit economics isn't just about finding waste; it's also about using your APIs more effectively. A couple of things to consider: 

• Qualify users as much as possible before making a high-cost request: Ensure you’re collecting qualifying information about customers upfront before making an expensive request to a service like Equifax or other credit bureaus, so you’re not burning money on unqualified customers. This approach can also create a better customer experience by being more clear about what you consider a qualified customer.

• Multi-source vendors: All vendors might say they have great coverage, but it’s nearly impossible to know the truth until you start using them. By having multiple vendors for high-value steps in your user flow, you can A/B test conversion rates and data quality. Remember, you pay for bad data quality, so it’s your responsibility to switch data sources (vendors) when you’re not getting the quality you need to optimize conversion rates.

Making API optimization a habit

For FinTech companies to emerge from this downturn stronger than ever, controlling costs and improving efficiency are front and center. Making API optimization a regular practice is a low-risk way to achieve these goals and improve unit economics. This includes regularly monitoring API usage to track costs and putting in place automated remediations, such as caching and removing inactive users, so that you can act on the opportunities that come from monitoring.

We know from our experience that it can take time to build the tools to optimize APIs, so we built Supergood. It automatically solves the many problems that come with third-party API integration, cost management, and maintenance.

If you don’t want to spend your evenings troubleshooting vendor schema changes, responding to false alarms, or answering exec emails about cost surprises - reach out to us at hello@supergood.ai. It only takes five minutes to install Supergood. We’re like an extra engineer that’s just focused on debugging and fixing vendor APIs.