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APIs The Building Blocks of Next-Gen Payments Platforms

August 7, 2023


A laptop shows APIs are the building blocks for next gen payment platforms

Adopting an API-first payment approach is becoming critical. As technology rapidly evolves alongside customer expectations, APIs have become the building blocks of next-gen payment platforms.

The evolution of payments in 2023 will be influenced by a number of trends. Data is clearly the new gold right now. Its use in financial decision-making to deliver personalized products, services, and experiences is critical. Over 90% of organizations agree that moving forward, data will be pivotal for decision-making. In a similar vein, AI- and machine-learning-backed analytics are necessary to make sense of data. Embedded payments are quickly becoming table stakes in the eyes of consumers, who also expect seamless payments to be secure. The key to successful e-commerce, particularly in an omnichannel economy, is the availability of quick and secure online payments.

However, consumer demands are not limited to a payment process for online shopping. The tech-native generation also demands a payment interface that eliminates the need to wait in long lines in physical brick-and-mortar stores. Options that enable them to pay first and pick later are even better. Consequently, mobile commerce continues to grow, especially among millennials and Gen Z, whose combined spending power tops well over $165 billion.

An API-first Approach

In creating payment platforms that cater to both the new and existing needs of both consumers and businesses, payment companies have quickly come to rely on APIs. Not only are APIs facilitating new ways to operate, but they also contribute to creating a vibrant ecosystem where collaboration and personalization can flourish. So much so that the API management market alone has risen to USD 4.5 billion and is set to cross USD 13.7 billion by 2027.

Building next-gen payment platforms now requires an API-first approach to product development. Payments providers and other relevant parties within the payment ecosystem must tap into partner APIs to build their own solutions and add new value for the end user. The bottom line is that APIs are the building blocks of next-gen payment platforms, both for the benefits they offer in product development and for the ecosystems they help create.

APIs Yield Speed & Flexibility for Next-Gen Payments Platforms

Customers have come to expect fast, inexpensive, and seamless payment services. Businesses cannot back down from ensuring an exceptional customer experience when 88% of customers say it is equally important to them as the company’s goods or services. APIs are a form of expression for payments companies, giving developers the ability to build new products and services with the data, applications, and functions at their fingertips. As a form of expression, they enable payments companies to quickly pivot, expand, and develop products to adapt to new contexts and changing needs.

Pre-fabricated products are out, and highly customized solutions are in. 71% of consumers have expressed a liking for a customized experience, while 76% have expressed frustration and dissatisfaction due to a lack of the same. APIs are inherently flexible, allowing payments companies to provide tailored solutions to clients and easily leverage those APIs in new ways for future products. The result is speed in launching new products; they can be released in days instead of months.

Adopting a product-minded approach where a minimum viable product (MVP) is rapidly and iteratively developed based on feedback adds to the speed element. It also allows companies to experiment more broadly and pursue products that show promise more vigorously. Speed breeds efficiency, as APIs allow developers to cut time and costs while quickly adding new functions. It is a far cry from the monolithic structure of legacy systems that require significant time and energy to churn out new products or features. APIs allow for the quick enhancement of products via new features leveraging existing APIs.

APIs for a Growth Mindset

APIs enhance the speed, flexibility, and efficiency of payment products, but they also enable companies to grow by helping them scale revenue. Partner sales via white-labeled products allow payment companies to scale sales. The business models for this are plentiful. Providers may charge developers to access APIs based on how frequently they access particular APIs or based on the type of API. Alternatively, companies can pay developers when they generate additional sales or bring in extra clients.

In addition to monetization, APIs help build flourishing ecosystems consisting of developers, partners, and clients. Developers aim to develop new features on top of existing APIs to improve functionality, while the original developers work to enhance the core. This type of collaboration fosters partnerships around products and creates a network geared toward innovation.

APIs are a critical driving force behind the evolution of payments, but payments companies still face challenges around building and integrating APIs. Organizations should be using RESTful design, which serves as a sort of standard for web-based services. Security is also paramount, and APIs have multiple options to secure the interface. Documentation, an API sandbox for testing, and error messages will also be vital in ensuring the quality of payment APIs.

API Is the Answer

APIs not only improve the speed and flexibility of product development while saving money and generating revenue, but they also support innovation. Using APIs as building blocks for next-gen payment platforms can help companies win new clients, build extensive partnerships and networks with third parties, and create ecosystems that push payments forward in a way best suited to serve the next generation of end-users.

Contact Us for the latest on API-driven Payment Solutions.

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