For corporations that want to stay ahead of the competition, innovation is a must, but developing and supporting a payment solution can prove challenging. Instead, many rely on their FIs to create this kind of technology, which presents these institutions with a number of hurdles. Assisting corporate clients — especially those with legacy infrastructures — can require tailored solutions, which can be costly and time-consuming.
API-based solutions offer a better approach for FIs, said Ritesh Pai, chief digital officer at YES BANK, India’s fourth-largest private bank. In a recent interview with PYMNTS, Pai explained that API-focused banking allows FIs to quickly reach more customers, give corporate clients more control and support new technologies.
“With API banking, you end up becoming that much more flexible and agile,” he said.
Flexible and Far-Reaching
Traditionally, banks manage the features and user experiences of their clients’ solutions, but corporate customers are beginning to seek greater accountability for their innovation strategies. Many crave greater opportunities to administer their solutions and control the user experience. To satisfy these customers, FIs must create specific customizations for each client, which can cause administrative headaches for FIs and greatly limit the number of customers they can serve.
As an example, an Indian supplier that regularly provides goods to various distributors could use the country’s National Automated Clearing House (NACH) debit service to expedite its supply chain and pull payments from distributors’ bank accounts. This would require the supplier to complete a one-time NACH debit mandate registration process for each distributor, and the supplier could ask its FI for a quicker customized onboarding solution to achieve this while supporting its existing payments gateway.
While this approach may work on an individual basis, the FI must create, develop and support a new customization for each company that wants to use its solution. A setup like this also requires banks to update each system individually. The same service can be offered to all of an FI’s customers via APIs, however.
“When we started offering API banking, my protocol … remained the same because [the bank created] a single, static API,” Pai said. “All our customers — corporates, startups, FinTechs — could consume the same API.”
That simplicity enables banks to quickly expand their offerings and customer bases on a large scale. In early December, YES BANK launched an API that allows corporates to accept online NACH mandates through their own payment gateways. Though this solution is just about a month old, it has helped enable more than 600 corporate users.
A bank that offers API-related services can also update its solutions for all customers at once, Pai said. Banks may choose to offer all of their services on API architecture, allowing clients to pick and choose which services they want to offer their end customers. Instead of restricting customers to a “take it or leave it” solution, API offerings more easily adapt to corporates’ needs, providing them with a deeper level of control.
“Corporates were also happy [with the API solutions], since a large part of [the user interface, user experience] and administrative control were under their purview, rather than them being dependent on the bank to provide that,” Pai said.
Changing Payments Landscape
Pai believes banking APIs will help speed up digital payments, expand the use of existing systems and facilitate the exploration and uptake of newer technologies, including NACH debit and QR code-based payments. Pai said these payment methods could eliminate corporates’ need to purchase point-of-sale systems and prevent shoppers from having to hand over payment credentials.
APIs can also help FinTechs, startups and banks take advantage of AI, blockchain and other emerging technologies, enabling them to provide new financial products and services. APIs could ensure that “a lot of solutions, products and services can be rolled out very quickly,” Pai noted.
As the payments landscape continues to evolve, banks must be able to quickly serve their corporate clients’ shifting needs at scale. Embracing an API-centered strategy could be crucial to providing flexible services to large customer bases.