Business Glossary

What is an API?

Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.

Business growth relies on agility both in terms of operations and the software that supports them. API technologies can be leveraged to integrate discrete software platforms and functions, improving operational efficiency and aiding agility.

Definition of an API

An Application Programming Interface (API) is a set of software code that enables communication between disparate programs. It does this by acting as an intermediary between one application and another – usually connecting client apps with a series of backend services or microservices.

An API is made up of four components:

  • An API gateway

  • API documentation (including manuals and other useful info for developers)

  • API developer portal

  • API testing environment

APIs interface with a range of different apps, enabling users to simplify their software infrastructure and help a company to improve efficiency by unifying other disparate apps and ensuring ease of functionality.

How does an API work?

API integration works by using the API platform as an intermediary between applications. The API is situated between a client app and a web server, processing and routing the data on either side. Each side of the communication is referred to as an endpoint.

The process is as follows:

  • The client app initiates a user request or API call to retrieve data from another application

  • Upon receiving the request, the API makes a call to the external application or web server

  • The app or server sends a response to the API with the requested data

  • The API then transfers the data to the user via the requesting application

What is an API gateway?

An API gateway is an API management tool that connects a client to a collection of backend services.

An API gateway acts as a reverse proxy, accepting requests for data or microservices (API calls) and aggregating them to each individual app that is necessary to fulfil the call before returning the appropriate data to the end user.

With this form of API management, users can manage a wide range of common tasks across a range of microservices including analytics, user authentication and rate limiting.

Integration of API gateways also allows businesses to closely monitor API use, add or retire different services or connect monetised APIs to a billing system.

API examples and use cases

In the age of DevOps and serverless IT models, developers use microservices in order to build and implement apps quickly, using APIs to enable these microservices to communicate.

Different types of APIs include:

  • Public APIs - Where access has few restrictions and an API key is easy to obtain

  • OpenAPI standard - APIs made using a set of readily available tools for developers that conform to a prescribed standard

  • Private APIs - APIs designed for a closed group (e.g. a company)

  • Partner APIs - These APIs share data between two or more companies or organisations

  • Remote APIs - APIs that manipulate resources stored outside the computer to manage a request

  • Composite APIs - Composite APIs allow users to access multiple endpoints on a single call

  • Microservices APIs - These serve a very narrow and specific purpose

  • RESTful APIs- REST APIs use Representational State Transfer (REST) protocol to transfer text requests via http

We see APIs in use every day. Whenever we order food via a delivery app or encounter a chatbot on social media we see APIs at work.

Square Developer

Square APIs enable you to accept payments securely and integrate your app with Square’s first party product ecosystem. Build full-featured business apps for yourself or millions of Square sellers.

Our API Reference is organised around core business workflows: taking payments, managing orders, syncing items and inventory with Square Point of Sale, creating customer records, managing business locations, and enabling Square sellers to use your app.

Learn more about Square Developer APIs

Application Programming Interface FAQs

What is API testing?

API testing is a core component of APIs. It usually involves making requests at one or more API endpoints and validating the response to ensure functionality, reliability and security.

How do APIs benefit small businesses?

APIs benefit small businesses by improving operational efficiency and allowing them to compete with big businesses. Because they are smaller and easier to update or change, they can help businesses in a number of ways, including:

  • Improving customer experiences

  • Facilitating secure collaboration between companies with end-to-end encryption

  • Innovating new products and services

  • Making operations faster and more flexible

  • Reducing overhead costs

Explore how Square can help you run your business.

Invoicing Software

Square Invoices is a free, all-in-one invoicing software that helps businesses request, track and manage their invoices, estimates and payments from one place.

Free Online Store

With Square Online, you can turn any business into an online business with a free eCommerce website. Set up a free online store that syncs with your inventory and your social media.

Mobile Card Reader

Square Reader lets you accept chip and PIN cards, contactless cards, Apple Pay and Google Pay anywhere. Connect wirelessly, accept payments quickly and get your funds fast.