APIs: The Backbone to the Real-Time Payments Revolution

The range of benefits that Real-Time Payments (RTP) bring to the table is palpable, to say the least.

Over the years, there have been many talks about the immense potential of real-time payments in the US. The unfortunate reality is that all this hype around instant payments was met with considerably slow-paced execution.

That was the story up until the pandemic hit. What transpired was unpredictable challenges for the consumers and businesses, alike — and in turn, making payments expediency more critical than ever before!

The shift from batch to real-time payments is a trend that is poised to shape the future of payments. Today, 56 countries have their own real-time payment rails. The multi-fold adoption that we witnessed in the last few months alone, makes one thing clear — real-time payments have arrived in all their glory!

The US is also now following suit — Zelle’s integration with The Clearing House’s real-time payments network was a welcomed move! What all of us in the industry are really looking forward to is the Federal Reserve System’s much anticipated instant payment services — FedNow.

APIs: A catalyst to build robust, real-time payments solutions

Though it took a pandemic to fast-track the deployment of real-time payment solutions, the potential use cases remain untapped. It’s time for financial institutions to move past the embryonic stage and step up their game in meeting the need for a better, faster payments network.

The role of a well-constructed API system cannot be ignored here. If you ask me, the API universe is underrated especially when it comes to making instant payments a reality.

APIs are paramount for tackling hindrances that slow down the adoption and deployment of real-time payment rails. While we have a long way to go in easing out cash flow and liquidity pains with RTP, APIs can help us get there faster.

Kristy Brandon, SVP eBanking at Comerica Bank sets the record straight with this tweet.

Use of Real Time Payments and APIs is here, if you aren’t at least investigating these technologies, you should be.

Fiserv, Jack Henry find new markets for faster payments https://t.co/YOqxdsr2Zm

— Kristy Brandon (@ebankinggirl) May 12, 2021

What we see today is that the payment providers are now more aware of the use cases of API in enabling advanced payment transfer options.

While a lot goes into developing and shipping out new real-time payments solutions, the work must not stop there. Those that are championing instant payments, must leverage APIs to ensure that businesses and consumers can easily access such options.

Given how APIs enable two systems to interact securely, payment providers are now in a race to roll out payment APIs. Businesses can integrate such payment APIs and connect with financial institutions that have deployed RTP solutions to transfer funds instantly.

With rising consumer expectations in the backdrop — payment APIs give businesses the much-needed flexibility to build customized payment solutions that allow instant transfer of funds.

Top trends that are powering real-time payments

Business Wire recently reported that in Southeast Asia,  every three in five consumers opt for RTP options.

Within the next decade, real-time payments are set to take off and become more of a global benchmark. What we can take away from this is that — over the next few years, real-time payments need to be a top priority for the financial services industry.

Let’s look at three primary trends that are driving the adoption of RTP solutions:

• Growing demand for contactless, instant payments: The need for ‘no-touch instant payments’ are on the rise, with the pandemic in play.
• The shift towards API-enabled real-time payments: Finastra reports that 86% of banks are looking to leverage open APIs to implement open banking capabilities and enable instant payments.
• Real-time payments are making way for micro digital economies: We see the likes of Amazon and Uber leveraging their existing architecture to offer innovative financial products.

Are you ready for real-time?

The speed of RTP adoption is undoubtedly staggering. Real-time payment transactions are expected to cross 300 billion by 2023.

This calls for FIs and FinTechs to come together and collaborate to give consumers the instant payments network that they are demanding. The future of payments is real-time — organizations that pay heed and take advantage of this opportunity will rule the next decade in payments.

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