A Complete Guide to API Development – Importance, Working, Tools, Terminology, Best Practices, Process, and More

Ever wonder how apps like Venmo and Robinhood connect to your bank account quickly? Under the hood, Plaid is an API (Application Programming Interface) that securely links your bank accounts to various financial apps.

Plaid’s API connects to over 12,000 financial institutions across the US, Canada, the UK, and Europe, powering over 8,000 financial apps and services. This enables users to manage their finances effortlessly, whether it’s sending money to friends via Venmo or investing in stocks through Robinhood.

And then there is Stripe, which quietly powers payments for millions of businesses online—from startups to giants like Amazon. With a few lines of code, Stripe’s APIs enable companies to `accept payments, manage subscriptions, and handle global transactions. In fact, Stripe’s infrastructure processes 500 M+ API requests per day, peaking at 13,000 requests a second, and supports hundreds of billions of dollars in payments annually.

For instance, Stripe helped Shopify scale its online payments across 175 countries. Shopify’s gross merchandise volume increased to $235.9 billion in 2023, marking a 20% year-over-year growth. ​This whopping feat was made possible through seamless API-driven integrations.

Whether it is sending money, tracking investments, or paying for coffee through a mobile wallet, everything hinges on fast, secure, and reliable API integration development. That is the kind of easy and instant experience users expect today. Businesses that can’t deliver that? They fall behind fast.

These facts and figures exemplify how API development has changed how modern businesses build, scale, and innovate. As a result, APIs have become one of the most critical enablers of digital transformation across industries.

This guide dives into everything you need to know about secure and scalable API development: what is an API, how it works, why it matters, how to develop an API, features, tech stack, API development services and the best practices. So, fasten your seat belts and get ready to dive into the world of APIs – the unsung heroes behind the functioning of endless mobile apps.

Open Banking API calls are set to increase by 427%, growing from 137 billion in 2025 to 722 billion in 2029. Don’t fall behind. Partner with us to build future-ready APIs that drive real growth.

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Understanding the Indispensable Role of APIs in Today’s Digital World

API is a set of instructions, standards, or requirements that let different software systems talk to each other, securely share data, and unlock new services.  On top of it, APIs eliminate the need to build a similar program or platform from scratch; you can use the existing one or some other app/platform. In short, APIs are the base of all the apps that help the digital world connect without reinventing the wheel.

For example, when we hit the ‘Connect Facebook’ button on gaming apps like Candy Crush, PUBG, etc., we do not need to enter our Facebook account details. Rather, it accesses the data from the Facebook server and lets us enjoy playing, all thanks to the API integration development.

Now that we know about API development and importance of API for mobile apps, let’s explore the basic terminologies that power API development and integration.

Comprehending the Pool of API Development Terminologies

Understanding how to build an API and its functioning starts with getting familiar with its core terminologies. From authentication keys and endpoints to protocols like REST and SOAP, each term plays a crucial role in defining how do APIs simplify complex programming tasks. This section breaks down the most essential API concepts to help you navigate development with clarity and confidence.

API Development Tools and Technologies

There are a plethora of API design tools and technologies involved in the process of creating APIs. The table below outlines some popular API development technologies used to deliver cutting-edge API development services:

Now that you are familiar with the API development technologies and terminologies associated with how to create an API, let’s dive deeper to uncover how API works and how to create an API.

How Does API Work?

APIs act as the bridge between applications and data. When a user interacts with an app, the API sends a request to a server or database for specific information. The server processes this request and sends the data back via the API, which the app then displays to the user. This seamless exchange powers everything from logging in to making payments or fetching live updates.

Take an API development example of a flight booking app/website. You filled out the form, entered the departure and return date, city, flight, and other relevant details, and submitted. Within a fraction of a second, a list of flights appears on the screen along with the price, timings, seat availability, and other details. How does this happen?

To provide such stringent data, the platform requested the airline’s website to access their database and get relevant data via the API interface. The website responded with the data that the API delivered to the platform, and the platform displayed it on the screen.

Here, the flight booking app/platform and the airline’s website act as endpoints, while the API is the intermediate, streamlining the data sharing process. When communicating the endpoints, the API works in two ways: REST and SOAP (see definition above). Though both methods produce effective results, an API development company often prefers REST over SOAP since SOAP APIs are heavy and platform-dependent.

Let’s take another API development example: creating a RESTful API for a food delivery app. The API allows users to register, log in, browse restaurants, place orders, and track deliveries. It connects the front end with the backend database and services, enabling seamless data exchange between users, restaurants, and delivery personnel.

Unveiling the Various Types of APIs

APIs come in different forms depending on their architecture and scope of use, each designed to address a specific connectivity challenge. Whether opening up services to the public, streamlining internal operations, or connecting businesses with partners, there is an API for every need. Let’s unveil the curtain and explore the different types of APIs silently working in the background and powering everything from your favorite apps to complex enterprise systems.

Open APIs (Public APIs)

These APIs are publicly available to everyone with minimal restrictions, authorization, and cost associated with these types of APIs.

Partner APIs

Partner APIs are shared externally but only with authorized business partners. They require specific rights or licenses to access.

Internal APIs (Private APIs)

Internal APIs are built for use within a single organization. They streamline operations by allowing different internal teams or services to communicate with each other.

Composite APIs

Composite APIs bundle multiple service calls into a single API request. They are particularly useful to address complex system requirements or behaviors.

Web APIs

Web APIs provide interaction between web servers and browsers or other web-based applications.

Must-Have Features of an Efficient API

Although the world is full of APIs, there is still a major gap in utilizing the perks of API technology. While some APIs make integration to the app a breeze, others turn it into a nightmare. To help you develop one that drives tangible outcomes, here are some of the efficient API features you must consider when building an API:

Modification Timestamps/Investigation Filters

The foremost API feature that an app should have is Modification timestamps/Search by criteria. An API should let users search data based on different criteria, like a date. This is because we consider the changes (update, edit, and delete) just after the initial data synchronization.

Paging

Many times, we do not want to see the complete data changed, but just a glimpse of it. In such a scenario, the API should be capable of determining how much data to display in one go and at what frequency. It should also inform the end user about the number of pages of data remaining.

Sorting

The API should have a sorting feature to ensure that the end user receives all the pages of data one by one. This feature empowers users to sort data according to the time of modification or some other condition.

Fast performance and high availability

An API should be responsive and quick, no matter the load. Minimal processing time, low latency, and near-zero downtime are key indicators of a well-built, user-focused API. so, when building an API, ensure it adheres to these parameters.

Scalability

A good API should be efficient enough to handle growing traffic smoothly. So, when creating APIs, ensure they can scale with time to handle tomorrow’s load. Whether your user base spikes or data volumes surge, your API should scale without slowing down or crashing under pressure.

API Development Best Practices that Grows and Scales

To truly future-proof your API and ensure it can handle scale, flexibility, and ease of use, you should keep a few API development best practices in mind. Here are some tried and trusted strategies you must contemplate when seeking the answer to how to make an API that drives real results:

Use Throttling

App Throttling is a great practice to consider for redirecting traffic overflow, backing up APIs, and safeguarding them from DoS (Denial of Service) attacks.

Add Rate Limiting

While throttling helps in short bursts of traffic, rate limiting keeps users within defined usage limits over time, providing an extra layer of API protection. For example, you set a Limit of 1000 API requests per day. When the user hits the 1001 request, the server will send 429 messages as HTTP status to the end user along with the message, “Too Many Requests.”

Consider the API Gateway as an Enforcer

API Gateway is the most crucial consideration while pondering API development best practices. While setting up throttling rules, applying API keys, or using OAuth, the API gateway must be considered the enforcement point. It should be taken as a cop that lets only the right users access the data. It should empower you to encrypt messages or edit confidential information and thereby analyze and manage how your API is being used.

Allow Overriding the HTTP Method

Since some proxies only support GET and POST methods, you need to let your RESTful API override the HTTP method. For doing so, employ the custom HTTP Header X-HTTP-Method-Override.

Evaluate the APIs and Infrastructure

At present, real-time analysis is possible, but what if the API server is suspected to have memory leaks, a draining CPU, or other such issues? You can’t keep a developer on duty to consider such situations. However, you can perform this easily using numerous tools available in the market, like AWS CloudWatch.

Use JSON Support/ REST

Though not compulsory, it is good to consider your API to be RESTful (or provide JSON support (REST)) for effective API development. REST APIs are stateless and lightweight and let you retry the upload mobile app process if it fails. This is quite tough in the case of SOAP. Besides, JSON, with its readable syntax and compatibility with most programming languages, makes it easy for a mobile app developer to parse it into any other language.

Authorize via OAuth

Implementing OAuth in your API is ideal for secure and efficient user authentication. It enables faster, token-based access without requiring users to share credentials, often with just a single click. This method is widely trusted for securing APIs in modern applications.

Ensure API Security

You must ensure your API technology is secure, but not at the cost of user-friendliness. If any user spends more than 5 minutes on authentication, it means that your API is far from being user-friendly. You can use token-based authentication to make your API secure.

Start with Versioning

As your API evolves, versioning helps you roll out changes without breaking things for existing users. Whether using URI-based (/v1/users) or header-based versioning, this small step goes a long way in managing updates cleanly.

Make Room for Caching

Instead of fetching the same data repeatedly, implement caching strategies like ETags or Cache-Control headers. It reduces server load and improves speed, especially for read-heavy APIs.

Create a Documentation

It is profitable to create extensive documentation for an API for mobile apps. It lets other mobile app developers easily understand the whole process and utilize the information to offer a better user experience. In other words, good API documentation in the process of effective API development will lessen the project implementation time and cost and boost API technology efficiency.

Don’t Skip Automated Testing

Last but not least, conduct automated testing. Regular testing with tools like Postman, Swagger (OpenAPI), or CI-integrated test suites can catch bugs early and ensure your API performs as expected through every change.

API Software Development: Crafting the Backbone of Seamless Integrations

Hyperconnection and hyperpersonalization trends bring the ability of applications to communicate, share data, and operate cohesively. Its not just a competitive edge—it’s a necessity. At the heart of this interconnectedness lies API software development, the silent engine powering seamless integrations between platforms, services, and systems.

Whether it’s enabling a mobile app to fetch real-time weather updates or allowing a payment gateway to securely process transactions, APIs (Application Programming Interfaces) serve as the critical link between diverse technologies. API software development process enables you to build scalable, secure, and future-ready APIs that drive innovation.

Objective and Process

API software development process involves the design, coding and implementation of APIs to allow system communication by feeding applications such as Spotify (Google Maps navigation).

Core Development:

• Understand business needs and set API goals.
• Select Programming Languages ​​(eg Python with Flask/Django, Node.js, Java) and structures based on project needs.
• Example: The Twitter API uses scala to deal with millions of requests daily.

Technical implementation

• Create end points and manage data formats (JSON, XML).
• Implement authentication mechanisms like Oauth 2.0 for security.

Maintenance and scalability:

• Use version control systems such as GIT (usually hosted on Github) for collaboration and tracking changes.
• Tools like Postman and Swagger guarantee friendly tests and documentation for developers (for example, stripe APIs with light code samples).

Future Readiness

• Design APIs to deal with increased traffic and integrate with third party services.
• Ensure compliance with safety standards such as GDPR or PCI DSS.

How to Build an API – A Step-by-Step Process

Building an API is about writing code and creating a powerful bridge that connects different digital systems. Following a structured step-by-step process and best practices, you can create robust and efficient APIs that integrate with your systems and scale efficiently as your business grows. Not sure how to make an API? Worry not. Here is a general outline of the steps involved in developing an API:

Define Your Purpose and Requirements

Before you begin the API development process, be clear about exactly what you want your API to achieve. List the problems it will solve, the users it will serve, the kind of data it will expose, and the operations it must perform.

Design the API Architecture

Once you have defined your objectives, it is time to craft the API structure. Design the resources, endpoints, request and response formats, and error handling flows. When designing the API architecture, focus on making it intuitive and scalable.

Choose the Right Tech Stack

It is time to choose the right API development technologies, tools, languages, and frameworks that best fit your needs. Ensure the tech stack you choose will make your API development services flexible, speedy, and scalable.

Document the API

Good documentation is essential for developer adoption. Explain how the API works, the available endpoints, authentication methods, expected responses, error codes, and any specific requirements or constraints. API development tools like Swagger (OpenAPI) can help automate this process.

Implement Authentication and Authorization

Security must be baked in from the beginning of the API development process. Thus, you must implement robust authentication methods like OAuth 2.0, API keys, or JWTs to protect your endpoints and manage user access.

Test Rigorously

Testing is not optional; it is indispensable. Before you connect your API to the systems, conduct thorough testing to make sure your API performs well under different conditions. This integral phase can help catch bugs early and maintain stability as you scale.

Deploy and Integrate APIs

Once you have completed the testing and are assured of its quality, you can deploy the API to the targeted platform. Ensure your deployment pipelines are smooth and offer clear guidelines for integrating your API into different applications or services.

Monitor, Analyze, and Iterate

Launching your API is just the beginning. The API development process does not end here. After integration, you need to continuously monitor its performance to track usage patterns, error rates, and system health to spot new opportunities and iterate the API accordingly.

API Development Challenges and How to Overcome Them

Building an API is a complex and challenging process. From leveraging API management platforms to exploring low-code/no-code API development tools, businesses face multiple hurdles when creating APIs. But worry not. Here is a brief table outlining the common API development challenges and strategies to overcome them:

API Development Cost

The cost of developing an API can vary significantly based on several factors. It includes but are not limited to, API features, its complexity, best practices used for API development, integration needs and so on.

Factors like security protocols, scalability requirements, compliance needs such as HIPAA or GDPR, and the number of endpoints all influence the final budget. Additionally, investing in thorough documentation, testing, and post-deployment support may add to the initial cost but significantly improve the API’s long-term value and usability.

On average, API development costs range between $30,000 and $300,000 or more. For instance, a simple API that performs basic CRUD operations can cost around $30,000 to $100,000. However, more advanced APIs that include authentication, rate limiting, data filtering, caching, AI integration, IoT connectivity, etc., can push the cost upwards of $100,000 to $300,000 or more.

Also Read: Mobile app development cost in 2025

API development costs range between $30,000 and $300,000 or more. Share your project needs with us and get a more precise estimate.

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The Future of APIs: Powering the Next Digital Revolution

The modern business world is rapidly shifting toward an API-first development approach. Enterprises now manage an average of over 15,000 APIs as part of their digital transformation efforts. This strategy enhances scalability and flexibility and accelerates time to market for new applications and services.​

In the coming years, several key trends and technologies are set to redefine the future of API development. For instance, AI-powered APIs will enable advanced capabilities like natural language processing, predictive analytics, and intelligent automation. As a result, the adoption of AI APIs is skyrocketing. No surprise then that the global AI API market is on track to soar from $44.41 billion in 2025 to $179.14 billion by 2030, growing at a remarkable CAGR of 32.2%.

At the same time, the expansion of IoT is making APIs critical for industries like FinTech, healthcare, and manufacturing to connect and share real-time data across a growing network of smart devices.

Additionally, API mesh architecture is emerging as a key trend to simplify the management of complex microservices ecosystems. This approach will help enhance scalability, security, and observability across interconnected services.​

These emerging API app development trends signify that APIs will become pivotal in driving technological advancements in the coming years.

Partner with Appinventiv for Efficient API Development

APIs are an integral part of custom app development. They are the connecting tissue that allows different systems to talk to each other. You can use this blog as your torchbearer on the path of API development. However, collaborating with a trusted API development services provider is still non-negotiable.

We are a premium provider of API and mobile app development services, specializing in designing secure, scalable, and high-performance APIs tailored to your business needs.

Whether you want to build a simple internal API or a complex enterprise-grade integration, our team of 1600+ tech experts puts their exceptional expertise and insight into every project, ensuring success and future readiness.

Contact us and elevate your digital transformation journey with secure and scalable future-ready APIs.

FAQs

Q. How to create an API from scratch?

A. To create an API, define endpoints, choose a framework (e.g., Flask, Express), set up a server, and code routes to handle requests. Use REST or GraphQL, test with tools like Postman, and deploy on platforms like AWS or Heroku. Ensure security with authentication (e.g., OAuth) and document using Swagger.

Q. What is an API in software development?

A. API is a collection of instructions and requirements that let a software or mobile application utilize the features/services of other applications, platforms, or devices for exceptional services.

There are basically different types of API:-

• Web service APIs
• WebSocket APIs
• Library-based APIs
• Object remoting APIs
• Class-based APIs
• Hardware APIs, etc.

Q. What is REST API development and SOAP API?

A. REST (Representational State Transfer) API is an architectural software style that describes a complete set of constraints that are employed for building web services. On the other hand, SOAP (Simple Object Access Protocol) is a much complex protocol, adding more standards than REST, such as security

Q. How do I make a good RESTful API?

A. Making a good RESTful API is easier when you follow these practices:-

1. Use Throttling
2. Consider your API Gateway as an Enforcer
3. Allow overriding the HTTP method
4. Make proper documentation
5. Determine the APIs and infrastructure

Q. What is JSON API?

A. JSON (JavaScript Object Notation) is an encoding scheme created to eradicate the need for an ad-hoc code for each app to interact with servers in a particular manner.

Q. how to build an API that’s secure and scalable?

A. To understand how to make an API that is secure and scalable, you need to start with solid API design principles—use REST or GraphQL, apply versioning, and validate all inputs. Implement authentication (OAuth 2.0 or API keys), rate limiting, and logging. For scalability, deploy using cloud services (like AWS or Azure) and containerize with Docker.

Q. How to develop API that integrates with third-party services?

A. Want to connect your app with services like Stripe, Google Maps, or Twilio? Learning how to develop API that works alongside third-party APIs involves understanding their documentation, using webhooks, and structuring your endpoints to relay or process external data. Always include error handling for failed external calls and keep your API tokens secure.

Q. How does using an API for mobile apps improve performance and user experience?

A. Using an API for mobile apps streamlines communication between the app and backend services. It enables real-time data updates, faster load times, and smooth third-party integrations like maps, chat, or payments—resulting in a more responsive and engaging user experience.

Q. How long does it take to build an API?

A. The time required to build an API typically ranges from 3 months to 1 year or more, depending on the features, complexity, tech stack selection, and other vital factors.

• Simple API development that performs basic operations like data retrieval or updates can take 3 to 6 weeks.
• Complex APIs involving authentication, real-time data processing, third-party integrations, or high security standards can take 6 to 9 months or longer.

Contact an API development company to get a more precise estimate for API development cost and timeline.