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As technology rapidly evolves alongside customer expectations, adopting an API-first approach in payments has become critical. APIs are the building blocks of the next-generation of payments platforms, utilizing the power of Anypoint Platform. 

Several trends are driving the evolution of payments in 2021. To start, data remains the new gold. Its use in financial decision-making to deliver personalized products, services, and experiences is critical. In a similar vein, AI/ML backed analytics, Digital commerce, and embedded payments continues to grow, especially among millennials and Gen Z — whose combined spending power topped $3 trillion last year. 

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In creating payments platforms that cater to both the new and existing needs of both consumers and businesses, payments companies have quickly come to rely on APIs. Building next-gen payments platforms now require an API-first approach in product development. Not only are APIs facilitating new ways to pay, but they also contribute to the creation of a vibrant ecosystem where collaboration and personalization can flourish. 

Key payment ecosystem players such as payments providers, application and terminal vendors, and payment schemes within the payment ecosystem can now tap into partner APIs to build their own solutions and add new value for the end-user. Several legacy communication protocols in the payment industry — including ISO8583 and some terminal device protocols — are getting replaced with API based protocols such as NEXO. 

Many FIs and FinTechs are adopting APIs as a more flexible and intuitive alternative. The bottom line is that APIs are the building blocks of next-gen payments platforms for both the benefits they offer in product development, but also for the ecosystems they help create. 

What are payment APIs?

Now that we have established the need for having APIs at the center of any digital transformation project of any company, and especially in the financial services domain. Let us look at some of the most commonly used APIs and what it means to enable those for your payment needs.

Card-based payment Interface needs at least three different types of payment transactions namely Authorize, Authorize & Capture, and Recurring. Since these transactions actually occur at the Processor level, the role of APIs here is to enable connectivity to the processors via a merchant exposed interface. This is where the market leaders such as Stripe, Square, or PayPal have proliferated — exposing simplified APIs to a much complex payment processing infrastructure. 

APIs yield speed and flexibility for next-gen payment platforms 

Customers have come to expect fast, inexpensive, and seamless payment 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.

APIs are inherently flexible, allowing payments companies to provide tailored solutions to clients and easily leverage those APIs in new ways for future products. APIs can also be highly configurable (with the help of profiling, externally managed properties, and separation of build processes and environment configuration/deployment processes). The result is speed to launch and operationalize 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 affords companies the flexibility to experiment more broadly and to 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’s 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.  

Growing your business with APIs

APIs enhance the speed, flexibility, and efficiency of payments products, but they also enable companies to grow by helping them scale revenue. Partner sales via white-labeled products allow payments companies to scale sales. The business models for this are plenty. Providers may charge developers to access APIs based on how frequently they access a particular API 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 build 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 towards innovation. 

APIs are a critical driving force behind the evolution of payments, but there are still challenges payments companies face around building and integrating APIs. While RESTful APIs have become the de facto standard across the financial services domain, a new flexible framework called GraphQL is changing the way the API contracts are written between consumers and providers of APIs. 

GraphQL allows clients to dictate the kind of data they are looking for from the server, instead of abiding by the API Specifications. Hence, organizations in the payment industry should adapt to newer and better ways of serving their customers to keep up with the rest of the technology landscape. Documentation, an API sandbox for testing, and error messages will also be key to ensure the quality of payments APIs. 

Security of payment APIs

Leading API security providers — such as Salt and NoName — have opined that traditional security solutions are necessary, but not sufficient, to provide a holistic security for the new age APIs. Latest trends like OpenIDConnect, TLS Encryption have become a necessity and do a really good job of ensuring vulnerabilities are addressed. 

But when it comes to Payment APIs, continuous and automated monitoring is required to ensure PCI-DSS compliance and prevent breaches. Breaches can be as simple as having rogue APIs running in production or as complex as exploiting a key vulnerability from the OWASP top 10 list of threats. Hence the need for a much more collaborative, and controlled approach towards API security is recommended.

Another emerging trend is to use non-intrusive, yet comprehensive, API discovery techniques, to discover documented and non-documented APIs across multiple API gateways, analyze their usage and user behavior, analyze data being transmitted to identify breaches and vulnerabilities based on certain predefined and customizable rules – all of which makes up for a robust and actionable plan for the enterprises.     

In a nutshell, APIs not only improve the speed and flexibility of product development, while saving money and generating revenue, but they also support innovation. Using MuleSoft based APIs as building blocks for next-gen payments 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.

Opus has created templates to accelerate the payments innovation journey and reduce implementation speed by up to 70%. To learn more check out Opus API templates on Anypoint Exchange.