API Value For Banks Is About Integrating Systems, Fostering Collaboration

Application programming interfaces (APIs) are hardly new to the financial services space, but due to our financial community’s traditional approach to banking, which is extremely siloed and compartmentalized, we were limited to the ways in which APIs could be used.

However, that approach has shifted in recent years, and banks are embracing the concept of open APIs and open banking. We’re now able to truly tap into the power of API technology.

“I think we’re seeing exploding interest in APIs because all of a sudden we’re able to use this type of technology to integrate with different payment platforms and systems,” CheckAlt Chief Growth Officer Allison Murray told PYMNTS. “So, it’s not just about sending payments via APIs anymore; it’s about interacting with other systems and other platforms to push and pull data in a real-time and seamless environment [to create a digital experience].”

At one time, banks primarily used APIs to transmit payments, but today they have many more applications. Many businesses are now leveraging the technology to interact with enterprise resource planning (ERP) and accounting systems, enabling them to validate and verify payments.

Identifying Common Pain Points

Murray suggested that businesses considering automating their financial processes identify their most common pain points. For example, they could involve having to use five different applications in order to run a report or difficulty making or receiving payments.

“I think the common theme across businesses is that they know all of this technology exists, but they don’t know what to do with it, and they don’t know which one to pick,” Murray explained. “We can just help them take a step back and help them understand where to prioritize those pain points.”

A survey of businesses found that half of B2B payments are projected to be sent by API by the end of next year. At the same time, 70% of firms have failed to meet their digitization goals, according to The Treasurer’s Guide to AR Payment Optimization, a PYMNTS and CheckAlt collaboration.

The reason for that disparity may be that a business’ digitization goals involve more than just sending payments, Murray said. This could include being able to interact with that payment and all the data around it, being able to pull reports from it and knowing which resources and platforms to use to run the reports on their accounts receivable (AR) systems.

“Let’s say a business receives a payment via API,” Murray said. “If they’re still using five different solutions and platforms to interact with that payment, is that really achieving their digital goal? Arguably not.”

Murray said it’s also extremely difficult to convince the paying customer, whether that be a business or consumer, to switch their preferred method of payment.

Rather than focusing on trying to make predictions on when the preferred payment method will convert from paper-based to API, Murray said CheckAlt’s role is to make sure it supplies businesses and financial institutions (FIs) with tools, like API technology, so they’re able to create a digital experience regardless of whether that payment has actually converted over from paper to API.

Working in a Collaborative Environment

Looking ahead, Murray said she sees a financial community that’s no longer compartmentalized — where FinTechs, banks and processors are no longer just competing with one another but collaborating.

“I see it as a good thing that we’ve progressed into this open banking, open API environment that will only allow us to further tap into API technology and other digital forms of payments and be able to work with one another in a collaborative environment,” she said.