SFTP vs API: Choosing the Right Integration Method for Your Business

In our latest whitepaper, we delve into the world of SFTP vs API integrations and explore which one suits your business needs best.

The Impact of Data Connectivity on Modern Business Operations

It’s no secret that data connectivity has revolutionized the way businesses function. New applications that seamlessly integrate with everyday systems seem to emerge every week. These innovations have transformed user experiences, emphasizing the importance of interoperability between systems. For software providers, having flexible and abundant integration options is now more crucial than ever before.

The Significance of Employment Data Transfer and Integration Methods

Transferring and integrating employee and HR data has always presented a significant challenge. This type of data, mostly stored in HRIS and payroll systems, requires careful and secure handling to comply with rules and regulations related to the protection of sensitive, personal information.

But what falls under the category of employment data? Employment data consists of information about both the company and its individuals. It includes details about the company itself (such as EIN, legal name, and HQ address), the company’s organizational structure (employee count, managers, departments), and individual-specific information (preferred name, contact details, employment status, income history, benefits data, etc.).

Businesses rely on employment data to effectively manage their workforce. To achieve this, they need to keep their data up-to-date and organized across all their systems. Software providers aiming to cater to businesses must strategically consider how to collect employment data from various sources in an organization. While most of this data resides in HRIS and payroll systems, there are numerous other systems to take into account. Unfortunately, there is no standardized way of categorizing or sharing data between systems. This often means that the transfer of employment data is mostly done manually.

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B2B applications looking to harness the power of employment data typically consider two integration approaches—SFTP vs API. While SFTP has been widely used in the past, more and more platforms are turning to APIs due to their scalability, security, and speed.

Deciding Between SFTP and API Integration: Which One is Right for You?

SFTP and API are two distinct methods of integrating systems. Before we explore the advantages of SFTP and API integrations, let’s briefly define each method.

What is SFTP?

To grasp the concept of SFTP, it’s important to understand FTP (File Transfer Protocol) first. FTP enables the transfer of files between a client and a server. Secure File Transfer Protocol (SFTP) emerged in 1997 as a secure way to transmit sensitive information like employment data. SFTP employs shell encryption to ensure data confidentiality. It requires manual updating of data (via flat files, CSV, JSON, etc.), encoding, and transmission through a secure channel between two platforms. Users receive email notifications when files are ready for download.

SFTP is highly convenient when it comes to processing large numbers of files rapidly, making it ideal for bulk file transfers. It also accommodates various file types. SFTP integrations require only one connection to initiate the file transfer, without relying on an internet connection.

However, SFTP has its drawbacks. Firstly, it relies on manual data entry that must be constantly validated to prevent errors. This tedious process consumes time and resources. Additionally, SFTP doesn’t support real-time data transfers. As soon as a file is uploaded to the server, it becomes outdated in theory. Depending on the use case, this can significantly limit the usefulness of data sharing. If accuracy, timeliness, and speed are critical factors, SFTP may fall short.

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What is an API?

APIs (Application Programming Interfaces) allow two applications to communicate with each other. APIs establish a standardized communication pathway between software, enabling them to exchange data and other information regardless of the underlying programming languages they are built on. APIs facilitate instant data push and request, offering real-time visibility into shared data between systems. Once an API is implemented, there is no need for manual downloads, restructuring, or error checking. Data flows seamlessly between systems.

The Drawbacks of SFTP and Advantages of API Integrations

So why should you consider API over SFTP for data transfers? Here are a few key reasons. For a more detailed explanation, be sure to download our whitepaper.

1. Enhanced Data Security

Even SFTP lacks the security controls required to combat modern cyber threats. Recent research reveals that over 400 million files from FTP servers are publicly accessible online. The average cost per lost or stolen record amounts to $146 USD. SFTP lacks security violation logging and user authentication capabilities, which are essential for detecting and preventing breaches. Encryption is an afterthought, requiring extra steps and IT expertise, making it challenging, expensive, and time-consuming to send files securely.

2. Real-time Access to Employment Data

With APIs, you can instantly access all the information you need. A live and continuous connection ensures that your application always has the most up-to-date data. This way, different teams within your organization can collaborate effectively, as they have access to the same set of information.

3. Enhanced Customer Experience and Reduced Errors

One of the primary downsides of SFTP is the need for manual management of sensitive data by employees. Downloading, updating, and re-uploading data files present numerous opportunities for errors to creep into the system. SFTP allows critical issues to persist, and resolving them requires multiple calls and emails with various parties. This not only frustrates customers but also wastes HR administrators’ time and resources. Moreover, it introduces errors that can disrupt your systems.

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Choosing the Best Integration Method for Your Business

To find out which integration method suits your unique business needs, download our SFTP vs API whitepaper. It contains comprehensive information, including:

  • A comparison between SFTP integrations and API integrations
  • Pros and cons of implementing each method
  • Ideal scenarios for SFTP integrations
  • Examples of innovative use cases powered by APIs

How Finch Can Assist You

If you’re considering an API integration for your application, Finch is here to help. Our dynamic and unified API provides read-and-write access, abstracting away inconsistencies across systems for optimal usability, regardless of the source. We take care of routine maintenance, bug fixes, and the heavy lifting involved in keeping up with the latest HRIS and payroll platforms. This allows your engineering team to focus on developing the features that set your application apart from the competition.

Employment system integrations are where Finch shines. Here’s why we are the API of choice:

  • Comprehensive: Finch seamlessly integrates with over 200 employment systems, surpassing the competition by fourfold.
  • Developer-friendly: We prioritize developers and empower them to create exceptional solutions.
  • Reliable: The Finch API excels at interacting with and maintaining connectivity with employment systems.
  • Secure: As a pass-through system, Finch is SOC2 Type 2, CCPA, and GDPR compliant.
  • Efficient: Through one API, Finch connects you with over 180 HRIS and payroll systems—an impressive four times more than any other platform.
  • Enterprise-ready: Our technology is built to handle large-scale synchronization with thousands of businesses.

Register for a test account now to explore innovative ways to leverage employment data with Finch.