SFTP vs API: Which integration method is best for employment data?

In our latest whitepaper, we explore SFTP vs API integrations and discuss which is right for your business.

It’s no secret that data connectivity has changed the way businesses operate.  It seems that every week, there is a new app that plugs into the systems businesses use every day. These innovations have changed the game for users, making interoperability between systems a need-to-have. For software providers, flexible and plentiful integrations are more essential than ever. 

Why Employment Data Transfer and Integration Methods Matter

Employee and HR data has traditionally been one of most challenging use cases for data transfer. Employment data, the bulk of which is usually stored in HRIS and payroll systems, must be handled carefully and securely in order to abide by compliance rules and regulations protecting the collection, storage, and usage of sensitive, personal data. 

So what is considered employment data? Employment data is any information about a company and the individuals within it. More specifically information about the company itself (EIN, legal name, HQ address), the company org chart (employee count, managers, departments), or about individuals (preferred name, contact information, employment status, income and pay history, benefits data, etc.).

Businesses rely on employment data to manage their workforce effectively. It’s essential for them to keep this data up-to-date and organized throughout all of the systems they use each day. Any software providers that want to sell to businesses must think strategically about how to collect this employment data from various sources of truth in an organization. While the majority of this data is housed in HRIS and payroll systems, there are thousands of potential systems to consider. There is also no standard way of categorizing or sharing data between systems, which means the transfer of this data is usually (at least partially) manual.

B2B applications looking to leverage the power of this employment data often consider two integration approaches—SFTP vs API. While SFTP has been more ubiquitous historically, an increasing number of platforms are looking to APIs for their scalability, security, and speed.

SFTP vs API vs Integration: Which is Right for You?

SFTP and API are two possible methods of integration between systems. Before diving into the benefits of an SFTP integration vs an API integration, let’s quickly define each method.

What is SFTP? 

In order to understand SFTP, you need to understand what FTP is. FTP stands for a file transfer protocol, which supports the transfer of files between a client and a server. SFTP, or Secure File Transfer Protocol, is a process that uses shell encryption to allow businesses to send and receive sensitive information such as employment data in confidence. SFTP emerged in 1997 as a way of transferring data between parties securely. It requires data to be updated manually (via flat file, CSV, JSON, etc.), encoded, then transmitted through a secure channel between two platforms. You receive an email notification when the file is ready to download. 

Because an SFTP integration is convenient for processing many files quickly, it’s often used for bulk file transfers. It also allows businesses to send and receive a wide variety of files. SFTP integrations only need a single connection to initiate the file transfer, and an internet connection is unnecessary.

However, SFTP has its downsides. First, it relies on manual data entry, which must be constantly validated to avoid errors. This is a tedious process that wastes time and resources. Additionally, SFTP doesn’t allow for the transfer of data in real time. The moment a file is uploaded to the server, it is theoretically out of date. Depending on the use case, this can limit the usefulness of data sharing altogether. If accuracy, timeliness, and speed are essential, SFTP falls short. 

What is an API ? 

APIs, or Application Programming Interfaces, are ways for two applications to communicate with each other. APIs standardize a communication pathway between software to exchange data and other information regardless of the underlying programming languages they are built on. APIs make it easy to push and request data instantly, providing real-time visibility into data shared between systems. Once an API is implemented, there is no manual download, restructuring, or error checking that needs to be done. If implemented correctly, the data flows seamlessly between systems.

The Downsides of SFTP vs API Integrations

So why API vs SFTP for the transfer of data? We outline just a few reasons below. For the full explanation, make sure to download our whitepaper. 

SFTPs and APIs both make it possible to transfer data between systems securely, however, APIs have a few key strengths over SFTP, especially when used to transfer employment data. Here are 3 reasons to consider API vs SFTP:

1. Improve data security

Even SFTP lacks security controls to handle today’s cyber threats. Recent research reveals that more than 400 million files from FTP servers are publicly available online, and the average cost per lost or stolen record is $146 USD. When files are exposed, SFTP does not log security violations or authenticate users – basic capabilities you need to help detect and stop breaches. Encryption is also an afterthought requiring extra steps and IT expertise, making it difficult, expensive and time-consuming to send files safely.

2. Gain real-time access to employment data

With APIs, you can get instant access to all the information you need. A live and continuous connection means that your application can constantly refresh the sync, meaning that you will always be working with the most recent version of your data. This way different teams within your company can collaborate effectively since they have access to the same set of information.

3. Improve the customer experience and reduce errors

One of the key downsides of SFTP is the need for employees to manage sensitive data manually. When downloading, updating, and re-uploading data files, there are many opportunities for errors to be introduced to the system. SFTP then allows crucial issues to perpetuate. When and if errors are found, they require several calls and emails with multiple parties to correct. This is not only frustrating for customers, it drains your HR administrators time and resources, and introduces errors that can wreak havoc on your systems.

Which Method is Best for You?

Download our SFTP vs API whitepaper for details on which method is best for you based on your unique business needs.

In it, you’ll find:

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

How Finch can help

If you’re interested in exploring an API integration for your application, Finch’s dynamic, unified API offers read-and-write access and abstracts away inconsistencies across systems for optimal usability no matter the source. We also handle routine maintenance, bug fixes, and the hard work of keeping up to date with the latest HRIS and payroll platforms, allowing your engineering team to focus on developing the differentiating features that set your application apart from the competition.

Finch is the API of choice for employment system integrations because we are:

• Comprehensive: Finch integrates with over 200 employment systems (more than 4x the competition)
• Developer-friendly: We focus on developers and empower them to create world-class solutions.
• Reliable: The Finch API does the best job of interacting with and maintaining connectivity with employment systems.
• Secure: Finch is a pass-through system, and is SOC2 Type 2, CCPA, and GDPR compliant.
• Efficient: Finch connects you with 180+ HRIS and payroll systems through one API—4x more than any other platform.
• Enterprise-ready: Our technology is built for large-scale synchronization with thousands of businesses.

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