Faster payments are all the rage, part of numerous discussions and plans when it comes to global payments — the concept serving as an ideal for not only what’s to come but what should come in terms of better transactions that meet the changing demands of consumers and businesses.
There are many moving parts that must be coordinated in order for faster payments to work, and that includes, among other tasks, the construction and deployment of robust, relevant application programming interfaces (APIs). In a new PYMNTS interview, Deva Annamalai, director of innovation and payment strategy at Fiserv, talked about the role that such technology plays in the further deployment of real-time payments (RTP), and the challenges facing the greater use of RTP.
“Even in established markets like the U.S., the use of APIs can help a lot,” he said, referring to fresh RTP deployments. A well-constructed API can help move a payment system past hindrances that work against the deployment and use of real-time payments. “APIs are changing the traditional model.”
The interview came amid the release of the latest PYMNTS Digital Banking tracker, research that helps to describe the current use of real-time payments. Other recent PYMNTS research also digs deep into the topic of real-time payments, which — globally speaking — remains in the early stages.
That research revealed that roughly 40 countries had real-time payment systems in place in 2018, and many more are currently working to provide them. According to Annamalai, such services can reduce businesses’ cash flow pains by allowing merchants to more quickly receive their revenues. There are also specific use-case benefits. For example, real-time payments can spare tenants fines related to late rental payments by helping them more rapidly move money into their landlords’ accounts.
Simply developing new real-time payment rails is not enough, though. Faster payments proponents must also ensure that businesses and consumers can conveniently leverage such options, and APIs can be key to enabling this access. These tools allow systems to better interact with one another, helping two parties to more securely transmit data.
So what’s changing in the world of APIs, including as they related to real-time payments?
“Payment providers are building APIs a lot faster now,” Annamalai said. He described API construction as a mixture of art and science, with the people creating them becoming much more aware of the specific use cases for which APIs will be employed. But that is creating problems, he said: When a use case is being abused by bad actors — and there are bad actors everywhere in the digital world, ready to exploit any opening they find — good actors must act quickly to provide new, needed protections for it.
“It’s a tricky endeavor,” he said.
Such challenges can also apply to peer-to-peer (P2P) payments, another form of instant transaction that is quickly gaining popularity, especially among younger consumers. “That’s actually a tough problem,” Annamalai told PYMNTS when asked about the risk management issues involved with the growing use of P2P payments. “Once the money moves it moves,” he said. “Once the money is gone, it’s gone.” But properly constructed APIs along with robust risk management, fraud prevention and consumer education efforts — especially if done proactively instead of reactively — can serve to ease a lot of headaches and problems before they ever get started.
Among the specific solutions that can prevent those P2P problems? “The best is to do a strong onboarding process,” he said. As well, fraud prevention efforts can be strengthened by looking more closely at such factors as how and when — and at what frequency — money is moved quickly from person to person or company to company, signals that can go a long way toward indicating potential fraud.
Consumer education also should not be overlooked, as people are less likely to fall victim to scams if they are aware of what to look for and are using P2P services to transfer money only to people they know, not strangers they meet on the internet.
As real-time payments gain popularity and spread to more markets — an effort that is sure to continue as 2019 gives way to 2020, Annamalai said — APIs and other technological features will serve to make the processes secure. In turn, that will build trust in real-time payments and further the popularity of such transactions.