Deep Dive: Taking An API-Centric Approach To Faster B2B Payments

Access to real-time payments (RTP) could resolve various headaches for businesses, as many do not want to face the uncertainties associated with late payment deliveries to suppliers and employees. Firms also crave access to precise, real-time financial information so they can better manage their liquidities. Instant payments can offer businesses flexibility, reassurance and security by ensuring faster fund delivery, while also furnishing companies with updated financial information that will enable timely investment decisions. Financial institutions (FIs) that serve business clients are thus considering ways to meet corporate payment needs, with 80 percent of U.S. banks reporting in 2018 that they would provide real-time payments.

Banks can leverage application programming interfaces (APIs) to offer real-time payment capabilities that clients can easily integrate into their systems. Such solutions can also help third-party developers build new tools that leverage rapid payments, providing customers with even more offerings. This month’s Deep Dive examines the advantages of utilizing API-centric approaches to provide businesses with faster payments.

APIs For Accessing Real-Time Payment Rails

FIs seeking to offer business clients faster payment options may wish to utilize real-time payment rails by connecting directly to these systems, or by leveraging APIs, payment gateways or other tools provided by entities that do connect directly. Tapping into APIs can be quicker, and require less technical effort and investment, as directly participating FIs and FinTech firms have already done the heavy lifting. A December 2018 survey of 57 U.S. banks found that 43 percent intended to connect to The Clearing House’s RTP rail via third parties, compared to the 27 percent that planned to do so directly.

Banks that gain direct or indirect access to instant payment schemes can subsequently offer products and services based on these capabilities. They could create financial services management platforms that incorporate instant payments alongside accounting services, for example, and make those offerings available for business client integration via APIs.

API-based services are easier for clients to adopt, too. They can easily build off APIs to create real-time payment offerings with user experiences tailored to their businesses’ needs. APIs enable client customization without FIs having to take on the investment and effort of designing and updating unique integrations for each business customer. Banks can simply make APIs available, and allow clients to serve themselves.

Enabling Third-Party Offerings

Banks are not just providing APIs for business clients, however. It pays to provide easy-to-access options because developers can create compelling services, which banks’ customers can then use.

Access to this expanded array of third-party services means customers do not need to turn to competing banks, making them more likely to remain loyal to their current FIs. France’s Crédit Agricole and Spain’s BBVA are two prime examples. Both offer APIs to third parties, creating new services based on each FI’s core bank functions.

Making APIs that are enticing to developers requires secure and flexible solutions. Banks should offer sandboxes — simulated environments in which third parties can test API-based services — to allow developers to begin creating offerings without having to wait until final APIs are released. Sandbox environments also help developers error-proof their offerings before launching them publicly.

API-Based Transaction Acceleration

Even API-based services that do not tap into real-time systems can accelerate payments by smoothing frictions. One U.K.-based payment processing and validation software firm offers FI and business clients APIs to pre-validate payment details — for example, allowing errors to be caught before cross-border or domestic payments are attempted. This reduces the risk of payments being returned to senders.

SWIFT’s global payments initiative (gpi) API-based service improves access to payment delivery statuses and settlement information, while also providing more transparent details on payment fees, giving banks varied payment support. The offering helps banks access data that can be used in client-facing solutions, and supports real-time cross-border payments between FIs in Australia, China, Singapore and Thailand, advancing goals of rapid international B2B transactions.

Businesses are increasingly demanding real-time payment information, and both FIs and financial services providers need to be ready to satisfy them. APIs can help these companies take advantage of real-time payment systems, and add conveniences to payment experiences in general. FIs looking to stay competitive may find that APIs could put their instant payment goals on the fast-track.