Voice of the Industry

APIs – a strategic differentiator for the payments industry

Friday 22 October 2021 08:25 CET | Editor: Oana Ifrim | Voice of the industry

In this new digital era, it’s vital businesses have the agility to adapt to situations as they evolve. Here, Sensedia Founder and CGO, Marcilio Oliveira, explains how APIs help businesses thrive and stay ahead of the pack.

Application Programming Interfaces (APIs) are strategically important to companies in the payments sector. They are the digital glue that connects and controls the interaction between back-end systems and different software programmes, such as cloud and mobile applications, ensuring fast and secure communication across ecosystems.

APIs not only help businesses unlock and expose their data for consumption by partners, they transform businesses into data enablers and digital innovators. And trends such as Open Finance, plus increasing customer demand for instant and mobile payments, are putting APIs at the heart of this digital revolution. 

Timeline

In the 1940s, British computer scientists worked on a modular software library, storing subroutines on punched paper tape organised in a filing cabinet. This cabinet also contained a catalogue of notes about each subroutine and how to incorporate it into a programme. Today, the catalogue would be called an API because it instructs a programmer on how to use or ‘call’ the required subroutine. 

As we moved into the 21st century and the internet grew, so did the importance of APIs. Social networks like Facebook and Twitter used an API platform that enabled them to input, consume and expose data without being reliant on interfaces. Here, the API was viewed as a platform, rather than a social network app.

Enterprises started using APIs in three ways:

  • To modernise their IT architecture – ensuring it can easily evolve and quickly create, expose and manage new apps and digital experiences.
  • To create a new ecosystem and integrate partners – prompting decisions on whether to connect with ecosystems or be at the heart of the ecosystem. Uber, for example, sits at the heart of the mobility ecosystem, WhatsApp is the same for messaging, Tripadvisor for travel and Facebook, social networking. These positions are achieved by exposing APIs and plugging them into partners.
  • To innovate, improve capacity for partner integration and enhance the digital experience – ecosystems create new growth opportunities. 

This is a common journey for every line of business and within the payments sector, providers are keen to be more connected, improve the digital experience, integrate partners and meet increasing demands for innovation.  

Payment sector evolution

Only companies that recognise their role within each digital journey will thrive.  Consider the process – when making a decision to book a room, plane, course or service, users require a simple, smooth-running and transparent payment solution to complete the journey.  But users are not initially looking for a payment solution; they want to access various products and services, so it is here additional prompts can be useful. This can only be achieved by exposing APIs and plugging products/services into various digital journeys. 

WhatsApp is a good example; in Brazil, its APIs enable users to send money as well as photos and messages. While integrating payments into digital journeys is the new trend, the process has to be frictionless and transparent.

As so many customers’ digital journeys involve payments, this sector has the most potential for growth through APIs. The customer touchpoints are vast, as are the opportunities to plug-in services to partners, and those who position themselves as providers of services and a platform will be ahead of the pack.   

The benefits

  • Better user experiences – APIs eliminate manual and tedious data entry by storing users’ information securely in the browser, so there’s no need to complete time-consuming checkout forms.
  • Lower churn rates – faster payment acceptance rates increase as fewer customers drop out of the payment process.
  • Simplicity – faster transactions help scale-up business sales.
  • Future-proofing – by using the latest technology, businesses can meet customer expectations, scale-up in the future and remain competitive in the long-term.
  • Flexibility – different transactions with varying payment types can be easily managed.

APIs also provide users with a toolbox of IT solutions that can easily be used and adapted for different business scenarios and they support security, governance, monitoring and scalability - fundamental elements of an ecosystem.

In addition, they speed up onboarding and improve the partner/developer experience – which for a partner can be the difference between choosing one payment provider over another. 

Transformation

Traditionally the payments sector exercised tight control over end-to-end delivery of its products, services and the user experience. However, growth in the internet, portable devices, and regulatory pressure to open up the market to third-party payment providers and fintechs have threatened this sector, forcing companies to adopt a more ‘open API’ approach.

APIs give adopters the power to connect throughout differing digital journeys, providing faster more responsive digital experiences.

API impact

Their biggest impact is creating agility; API adopters benefit from a faster, more mature integration, without having to change back-end systems.  They give greater control over what data is exposed, support security and scalability (boosting systems not designed to be used in so many different scenarios) and enhance the partner/customer experience.

Strategic focus

APIs require a strategic focus which is why Sensedia offers more than just an API platform. Any solution must detail how APIs can change a business, support its evolution, resolve technical issues and meet business goals. 

This digital glue is driving a new wave of innovation centred on sharing services and it’s no surprise to find organisations across all industries are keen to find out more about APIs and how they can transform their business processes. 

About Marcilio Oliveira

Marcilio is Co-Founder and Chief of Growth at Sensedia and helps companies adapt to a more open, connected and digital world using modern integration strategies, supported by APIs, Microservices and Events. Having led digital transformation and API-enabling projects in multiple industries, Marcilio speaks at major events around the world on this topic. He has a Masters’ degree in software engineering from the University of Campinas, is an Associate Professor at the University and Metrocamp and has also been a Research Lead at the Campinas University innovations lab. Email marcilio.olliveira@sensedia.com 

About Sensedia

Sensedia is a leading integration solutions provider with 150+ enterprise clients across a range of sectors. Its world-class portfolio includes an API Management Platform, Adaptive Governance, Events Hub, Service Mesh, Cloud Connectors and Strategic Professional Services' teams.  Sensedia is winner of Wealth & Finance International’s ‘Best Open Banking Solutions Provider 2021.

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Keywords: Open Banking, API, Open Finance, digitalisation
Categories: Banking & Fintech | Online & Mobile Banking
Countries: World
This article is part of category

Banking & Fintech