What is an API? (Definition & Types)

June 30, 2022


The beginnings of software development implied writing new code for every new program. Eventually, software developers found that they could create code libraries as well as reuse existing code to reduce production times and costs.

This discovery then led to the idea of sharing services with clients, whether for a price or for free, to help them create software and integrate services. That is how the idea of APIs came to life.

Nowadays, most people use APIs daily without knowing about them. This guide reveals what an API is, how it works, and how it benefits online businesses.

What is an API and how does it work?

API Meaning

API stands for application programming interface and represents a type of software solution that acts as an intermediary between an application and another app or server and allows them to communicate.

An API translates data from one system into a language readable and usable by the other system and vice versa.

API Examples

  • Logging in to a website using third-party accounts, such as Facebook/Google/Microsoft/Twitter. Instead of creating a new account, many websites and apps offer users the option to register or log in using data from one of their social media accounts. To achieve this, websites and apps must obtain an API key from those social media networks to get access to the API which retrieves data needed to register a new account.
  • Travel booking. The reason users can see vacancies, travel packages, and transportation listings is because travel booking websites are granted access to databases of hotels, hostels, travel agencies, and transportation companies via APIs.
  • Weather snippets. Weather apps get their data from either the national weather agency or private weather forecasting companies via APIs.
  • Ecommerce. Every time a customer wants to complete an online purchase, they are faced with a payment API (also known as a payment gateway API and payment processing API) – the API connecting the store to its payment service provider. When a customer completes the checkout form, the payment API forwards that information in the form of a transaction request to the payment service provider. The PSP then sends an authentication request, or a transaction confirmation or rejection via the API back to the customer. Other API uses in ecommerce include marketing, calculating and displaying prices, creating exclusive offers such as upsells and cross-sells, data management, etc.

Note: CCBill is one of the leading ecommerce payment service providers. The CCBill payment API provides a comprehensive solution for custom-built ecommerce and subscription payment processing. Tell us about your use case.

How Do APIs Work?

APIs intermediate in the communication process between a client (the API user) and a server (the API service). An API call represents one complete communication cycle, which involves the following steps:

  1. A user submits a request to an API using the client application.
  2. The API translates the request into a format usable by the server and forwards it to the server.
  3. The server performs the requested actions.
  4. The API retrieves and translates the result of the request into data in a format usable by the client.

What Do You Use APIs for?

API calls are used to instruct the server to:

  • Find and display data based on a set of criteria.
  • Modify existing data.
  • Create new entries in the server database.

API Types and Protocols (Architectures)

API categorization is based on who can use the API (API types) and what the rules of API calls are (API protocols and architectures).

API Types

There are four types of APIs:

  • Private APIs. Are for internal use (connecting data and systems within a business).
  • Public APIs. Can be used by anyone but may impose certain limitations or costs.
  • Partner APIs. Are used between partnering businesses.
  • Composite APIs. Represent a combination of two or more APIs designed to address complex issues.

API Protocols and Architectures

API protocols specify what commands and data types the API understands.

APIs are categorized into four protocols:

  • Representational State Transfer (REST) APIs. Are used to access and retrieve requested data from a server, perform internal functions with it, and return output data back to the server.
  • Remote Procedure Calls (RPC) APIs. Resemble the process of calling a function in JavaScript, PHP, Python. They request the execution of a block of code on another server, the block containing a method and arguments.
  • Simple Object Access Protocol (SOAP) APIs. Allow communication between different operating systems because they are independent from programming languages and underlying transport protocols. They translate requests and responses into the XML data format.
  • WebSocket APIs. Enable real-time, two-way communication between a user and a server without them having to wait for each other’s actions.

Advantages and Disadvantages of APIs for a Business

APIs bring many benefits to businesses that choose to implement them. However, business owners should become acquainted with the disadvantages of APIs and implement precautions to mitigate them.


Advantages of using APIs are:

1. Creating and Using Integration Opportunities with APIs

APIs are used to add new functionality to or enhance existing software without having to write new code from scratch.

2. Driving Innovation with APIs

In the modern era of technology and the internet, people’s demands for technological capabilities and functionalities increase daily. The only way to accommodate those demands is to apply changes to existing code (APIs) instead of rewriting it.

In addition, businesses deploying APIs provide clients with a competitive advantage if they are among the first ones to invent and implement new functionalities and ways of use.

3. Increasing Brand Exposure and Sales Using APIs

To understand how APIs increase brand exposure and sales, let us take a closer look at the relationship between airlines and flight aggregators.

Customers want the quickest and easiest way to search for flights, which is why they use flight aggregators – websites and applications that collect and display all flight ticket offers in one place.

A flight aggregator requires APIs from every participating airline to access their database and display real-time information about ticket availability. Once a customer submits a query (departure location, destination, number of people traveling, baggage options, flight class, etc.) the API fetches that data from the airlines and displays it to the user.

When the user decides to make a purchase, the API informs the corresponding airline about the sale and forwards relevant data.

4. Reducing Development Costs Using APIs

Open-source and SaaS APIs help businesses incorporate features and applications in their internal systems or digital products without having to dedicate the time and funds to in-house development.

5. Collecting and Analyzing Data Using APIs

Automating data collection with an API speeds up the process and eliminates data entry errors that could occur with manual entries.

APIs can be used for data collection in two ways:

  • By extracting data from another entity (client). Examples include: Google Trends, Google Vision, Wikipedia Pageviews API, etc.
  • By collecting usage data (server). Examples include: machine learning software, analytics APIs, and CRM (Customer Relationship Management) system integrations.

Note: Learn more about API integrations.


The disadvantages of using APIs are as follows:

1. Security Issues Associated with APIs

As beneficial as they are, APIs have security weaknesses. Before creating APIs or using third-party ones, businesses must implement security measures that will mitigate the risk of data breaches.

2. APIs and Dependency Syndrome

The performance of a client depends on the performance of the server and API – if one of those two is down, the client will not work as intended. In addition, when an API is breached, all clients using that API are at risk of data leaks.

3. Management Difficulties Related to APIs

Due to the convenience and benefits of APIs, more businesses, especially startups, are incorporating them on a large scale.

To maximize the efficiency and security of all APIs in use, each one requires monitoring and internal performance optimizations on both the client’s and server’s end. The more APIs an enterprise uses, the more difficult the management process becomes.

Note: Learn more about APIs and how they compare to SDKs in our article SDK vs API.


You know what APIs are, how they work, and what they are used for.

APIs are what makes online browsing functional and seamless, so it is safe to say that they are here to stay. With so many companies going digital due to current global conditions, a growing trend is expected in the worth and use of APIs.

About the author
Mirjana Fodora
Mirjana Fodora is a Technical Writer with a background in Web Design and Development. Despite being one of the youngest members of CCBill, her writing skills and technical aptitude help her produce factual, informative, and user-friendly content. If not writing or learning a new skill, you'll find her binging fintech and marketing videos or gaming.
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