APIs have transformed the way we purchase, and now they are poised to completely change our payment experience. Customers increasingly demand secure, interconnected, and intelligent digital payment services. Across the whole range of the payment space the most forward-looking companies embrace an API-first approach in their product development. Why? Because APIs secure a competitive advantage and enable superb payment solutions. What is more, APIs foster the development of a vibrant ecosystem.

The “new normality” in payments implies that your peers, or other industry players, can tap into your APIs and build their own solutions to add value to the end-user. Superior platforms find the optimal balance between delivering services to clients directly, delivering via partnerships, and enabling third parties to bring about changes over a platform through APIs.

Payment companies typically go through 3 stages in their API strategy. The first step is opening APIs for one-to-one integration only. This means an API provider individually links partners to the company’s business services, such as accepting payments or P2P transfers. Afterwards a provider expands access to the standard payment API for multiple partners. The 3rd stage is releasing public APIs and testing new revenue channels with external developers.

So why are APIs so vital for payment solutions? In this article, we explain why APIs are the new norm for payments, delivering efficiency, scalability, speed, and most of all, an important ecosystem edge.

Key Benefits

Efficiency

Using APIs early on adds efficiency to the overall product development. First and foremost, APIs enable you to significantly decrease costs and time, which is crucial given rapidly changing customer needs.

APIs also decrease the difficulty of application scalability. You can add new functions by simply adding or removing APIs. Compared to monolithic structure, API-driven software typically results in fewer bugs and more stable products. What is more, you can enhance your product internally via APIs, enabling any developer with fresh ideas to quickly mash-up your existing APIs to offer new features and products.

Speed & Flexibility

We have mentioned above that customers demand faster, lower-cost and more agile payment services. API-exposed products are easily customizable since they separate the frontend and backend. Within the latter, it is often possible to allocate multiple services, which enables enormous flexibility.

Your clients may have varying business processes, they might target different groups of end-users, and they may do business in various regions. All that makes it near impossible to offer a pre-fabricated product. APIs can help deliver more tailor-made solutions to clients. With these solutions, another point is speed. When a client expects a fast launch of a product, they assume days or hours, not months.

Scale Revenue

APIs don’t have a “name”. White-labelled products are popular and convenient form of partner sales. They allow you to scale sales quickly. There are different ways to make money using APIs. Some providers charge developers every time they access an API, charging different rates based on the type of API, or how frequently the provider accesses it.

Others pay developers for extra clients they bring or for generating extra sales. Others charge a percentage of the money exchanged in each transaction. Lastly, some set up ad hoc revenue sharing schemes adapted to the application. Each of these approaches offers a revenue upside for a platform that goes open.

Ecosystem

API-exposed products (even if at early stages) attract developers who can subsequently build on top of new API features, potentially improving the functionality. The initial team of developers continues to enhance the core instead of reallocating efforts to new features, saving on research and development costs.

This in turn creates a set of partnerships around the product, which can subsequently grow into an ecosystem. API-based payment services increase agility and the ability to tap into a new network of partner and developer innovators.

To sum up, the use of APIs can add up flexibility to product development, and save tons of time and money for both you and your clients. Finally, they contribute to ecosystem development.

How Good Is Your API?

Stripe, PayPal, Dwolla, and LevelUp are major players in payment API space. ACI Worldwide, Difitek, Payment Components and SDK.finance are payment API enablers. Good examples in banking include French Credit Agricole and Spanish banking heavyweight BBVA, which offer third-parties access to their APIs and allow them to innovate on the top of their core bank functionalities.

Dwolla, a sample payment API, offers an exceptional sandbox and developer network.

APIs are the key revolutionary force in payments. But that logic only works if the payment API integration is simple, the functionality is easy to use and easy to test. The best APIs only require developers to add a snippet of JavaScript to a website’s code.

Some common characteristics of quality payment APIs include:

  • Up-to-date design. Today, the most common API design is RESTful, which has become the API standard of web-based services.
  • Flexible. It accounts for flexibility, richness of functionality and efficiency
  • Secure. It offers multiple options for securing your interface.
  • Anti-fraud. It has easy-to-use fraud protection built-in.
  • Well-documented. It has good API documentation, an API sandbox to test APIs, and error handling with helpful error messages.
For more on what makes quality DX, read Optimize Developer Experience For Your API 

Conclusion:

The payment industry is currently going through tectonic shifts and APIs are the key moving force. In order to comply with customer’s needs a tech vendor/payment platform should be able to account for flexibility, speed, and cost. All those things can be achieved by adopting APIs.

Overall, building your solution as APIs gives an enormous set of benefits which ultimately result in winning clients, securing strong relationships with 3rd parties, and ultimately contributing to the ecosystem creation. Good payment APIs provide users with frictionless onboarding, useful API documentation, account for security, as well as rich functionality and flexibility.

Pavlo Sidelov

About Pavlo Sidelov

Pavlo Sidelov is a СTO of a core payment platform SDK.finance based in the Czech Republic. He is an author, speaker with a 10+ year experience in digital payments.