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What Is an SDK in Digital Banking and How Is It Different From an API?

By Nick Marshall

When end users search for a flight online or order a new pair of shoes on a mobile app, they want results in just a few clicks. Behind the scenes of that frictionless experience, however, there’s a complex series of processes to manage. In this case, real-time flight data from airlines or updated inventory data from retailers has to be aggregated, secured and shared with the user’s app. The tool that allows different platforms and operating systems to talk to each other is the application protocol interface (API), and to enable that, developers require a software development kit (SDK) to build the extra functionality. 

In digital banking, APIs and SDKs allow financial institutions to offer enhanced features for their existing platforms, from in-app purchases and Buy Now Pay Later (BNPL) credit to currency exchange comparison tools, spending trackers and “find my nearest” branch or ATM searches. Find out more about SDKs, APIs and how both are important for digital banking. 

What Is an SDK?

SDK stands for “software development kit,” but it is also commonly referred to as a devkit. Think of it as the code version of a gourmet meal kit provided by a restaurant for you to recreate their signature dishes at home. It features the ingredients, recipe, step-by-step instructions and troubleshooting advice, although developers installing a software development kit will typically discover these instead:

  • Code libraries — prepared sequences that give them a shortcut.
  • Testing and analytics tools — to check that the product is functioning as intended.
  • Debuggers — to test for bugs and allow the program to run smoothly.
  • Guides and tutorials — documentation on how the code works.
  • Software framework — including one or more APIs to allow communication across platforms, programming languages or operating systems.

An SDK will contain everything a developer needs to create a custom app without having to build everything from scratch. Each SDK is designed for use with a specific operating system (e.g., Android or iOS) or programming language. 

The Advantages of SDKs in Banking

In simple terms, SDKs help financial institutions compete with fintechs in an agile, effective manner. Often, banks or credit unions have the ambition to upgrade their user experience but lack the in-house resources. SDKs anticipate those concerns and provide software developers with everything they need to enhance functionality. After all, software developers rarely code a project from scratch, and most will “reduce, reuse and recycle” code wherever possible, whether it’s open source or proprietary. 

In digital banking, SDKs empower financial institutions to enhance their platforms with a variety of features, such as:

  • Payment processing from a wider range of card platforms.
  • Secure mobile banking.
  • Data compliance with existing regulatory frameworks.
  • Protection against data hijacking while transactions are in transit.

In turn, the out-of-the-box functionality that SDKs deliver provides the bank or credit union with a shorter development cycle, built-in support and a standardized process for creating a customized user experience that leads to higher engagement and more successful financial outcomes. 

Software Development Kits in Action

Perhaps your bank or credit union offers a legacy mobile banking app that is starting to look a little faded and off the pace compared to some of the flashier mobile wallets from up-and-coming fintech providers. With the appropriate devkit, a software developer can add new functions, such as push notifications or geolocation, to the existing app relatively easily without having to rebuild the code. 

SDKs enable enhanced features in three main areas:

  1. Programming — to help develop programs in various code languages in a standardized, streamlined way.
  2. Analytics — to enable Google and others to extract data about user behavior and actions.
  3. Monetization — to incorporate advertising or in-app purchases.

How an SDK Works for Lumin Digital

Lumin provides a customizable SDK for each new bank or credit union partner to allow software developers to add enhanced features to desktop, mobile, web and downloadable apps. Financial institutions can build powerful, permanent relationships with their end users through personalized UX interfaces without going back to the drawing board in terms of software development


These tech acronyms are often confused, but there’s a difference. An APIis the code that lets two apps communicate and share data. It’s the pathway for collaboration, establishing the protocols for two programs or programming languages to talk to each other. The SDK, on the other hand, is the entire kit that contains one or more APIs plus any other required components to make the extra functionality work. 

To provide an analogy, when you sit down at your computer, you can choose from a mouse, keyboard or touch screen (or all of the above) to input your commands. That’s the API. The SDK, on the other hand, would be the operating system, hardware, program files, user manuals and peripherals required to exchange commands between human and computer. 

Work With Lumin Digital

What links them both is that they make software development more cost-effective and easier to implement. To find out more about how your bank or credit union can deliver the enhanced experience your end users demand through customizable SDKs, request your Lumin Digital demo today. 


IBM – SDK vs. API: What’s the Difference? | IBM

Adjust – What is an SDK? What do SDKs do? | Adjust

McKinsey – From tech tool to business asset: How banks are using B2B APIs to fuel growth | McKinsey