How APIs are transforming payments

In the last decade the payments industry has been confronted with increasingly complex demands: emerging business models such as the online outsourcing of casual labour and crowdsourcing (Odesk, Elance,, Amazon Mechanical Turk), complex supplier payments (online travel agents, global assistance providers, online procurement), as well as changing consumer habits (smartphone and tablet adoption) growing calls for a seamless, real-time experience, an explosion in cross-border transfers and a drive to create hybrid customised payment services. The one-size-fits-all model that most retail and corporate banks offer is no longer adequate. In their place, alternative payment solutions are on the rise to keep up with customer demands.

These changes in the market place have put significant pressure on existing payments systems to deliver a functionality that they simply weren’t designed to perform. Payments organisations are scrambling to leverage their existing technology and provide new services without starting over completely or breaking the bank.

The legacy systems currently being used by most banks are no longer fit for purpose. As greater varieties of payment types and non-standard transactions hit the market, this commoditised system simply doesn’t cut it. This is where APIs are coming in to play. The Open Development Payments Platform (ODPP) – or Open Payments Platforms – has been hailed as the next big thing in payments technology.  APIs allow the functionality of an underlying payment platform to be exposed and leveraged by third parties. Open Payment platforms are revolutionary – they allow payment organisations to configure and generate, rather than build, new payment services. Cloud services enable the creation of highly customised internet-based products for business clients by configuration as opposed to having the programmers build software.

We have seen very few banks publicly release their own payments APIs which is preventing them from creating services tailored to customer. A recent Gartner report noted: “The banking industry has lost its way, both in the services it provides to customers and its future profitability to stockholders. Banks need to transform both their delivery models and architectures to remain profitable and relevant in the financial services’ value chain. Applications are preventing transformation in the banking industry because they are rigid and reactive.” Security, compliance and integration issues are standing in the way for banks.

A way out of this quandary is for banks to work with payments programme partners such as Ixaris that can provide customisable payments apps to the bank’s customers which do not require lengthy integration projects. The financial services industry is clearly undergoing a shift in its priorities, as it leans to focus more on product innovation and IT modernisation in a bid to build competitive differentiation and improve the customer experience. Those financial institutions that are primed to take advantage of the API revolution will in turn be the best placed to succeed in the long run.