What’s up with you friends, the 5th part of Fintech series speaks about fast tracking payments through open API environment.
As a growing number of payments technology providers discover the power of an application programming interface (API) to drive product adoption, best practices for developing effective payments APIs also are emerging. The API movement overall is playing a key role in advancing development of mobile banking and e-commerce apps and speeding up the internal sales cycle for new products.
Open and Instant
Open APIs and instant payments are, in practice, inextricably linked. Together, these two components have the potential to bring about great change. The arrival of ‘open’ means that trusted third parties will have access to account information and payment initiation and a host of new propositions will emerge. Open APIs without instant delivery will always be a second-rate experience. Likewise, instant payments without added value are just faster, which is not always better.
Payments in context
Consumers expect everything to be available in real time and only a few clicks away. Tablets and smartphones have made this possible. Although instant is the ‘new normal,’ payments must always be regarded in context. Banks will need to pilot and test new services with customers. At the end of the day, we are going to have different types and flavors of APIs. Every bank must consider its own objectives, risk appetite and development strategy.
Banks must consider the broader implications of real time to ensure they have the right foundations in place.
Open APIs and instant payments are often treated as distinct topics with separate budgets and business owners. But, as a bank it usually makes sense to run these projects as one, with one owner and one budget. With potentially so many disparate areas of the bank involved, the key is to encourage openness and transparency.
Customers and developer participation in the development process is crucial to maximize the opportunity for new propositions that were not previously available. Careful planning and understanding system interdependencies is critical. Moreover, banks are all at different stages of adoption with real time technology and payments modernization, so this will be a greater technical challenge for some banks than others.
Banks with legacy systems
Open APIs are not something banks with legacy systems can necessarily do in one hit – open APIs requires access to many systems. There may be sudden surge in traffic, so scalability is an important consideration, and will impact on a bank’s ability to compete.
The performance of an open API will directly impact the user experience of a bank’s customers. If a third-party app is slowed down by the bank’s performance they may choose to work with another bank. The ability to do non-disruptive upgrades and deployments is essential.
Technology providers are creating APIs to streamline and speed up the process for third parties, integrating new software and services into their operations, typically by offering a set of open specifications on how various software components should work together. Names of Banks using open APIs include BBVA, French bank Crédit Agricole, Turkish bank Garanti and German Fidor Bank, among others.
A key to success for payments technology companies developing APIs is to think like the end user. The goal is to help organizations get ahold of innovative technology quickly and then create a great opportunity for innovation and differentiation for those users.
(References: fisglobal.com, paybefore.com)