How APIs are transforming payment systems across the enterprise

Open banking is in the ascendancy, with research showing more and more customers and businesses are adopting its principles in the apps and services they use and offer respectively. Research from Open Banking Limited (OBL) shows that the proportion of digitally active consumers who use open banking grew to 13% in January 2024 – while 18% of small businesses similarly have adopted the technology.

The machinery at the heart of open banking is the application programming interface (API), which has made data-sharing a possibility. APIs are software intermediaries that allow two applications to speak to each other; a set of rules and protocols serve as a bridge that allows the software to securely share data and features. In finance and banking, APIs have been critical to modernizing the sector.

The rise of the API in banking

The OBL research cited PwC findings that the total number of API calls in Germany, France, Italy and Spain was less than half (6.4 billion) API calls in the UK (14 billion) during 2023. Transactions in the UK that rely on APIs are also expected to rise in the coming years, with an ACI Worldwide report forecasting a 17% compound annual growth rate by 2028. APIs connect businesses around the world securely by lowering the barriers to data sharing and integration across systems, with open banking in particular a huge beneficiary.

There are several key benefits to the emergence of API in payment systems – chief among them the much better customer experience that they offer. They are easy, fast and secure ways for customers to access banking products and services on their own terms, according to research from McKinsey, and they also offer a certain versatility that can lead to faster modernization. APIs have become far more important in recent years, the organization found, with 88% of those it asked saying as much. Four in five also said APIs are now a priority for business and IT functions – with many large banks launching API programs and dedicating an average of 14% of their IT budget to APIs.

Counting your efficiency gains

In many areas of the finance sector, complex and archaic systems slow down processes and create barriers to productivity. Adopting APIs has presented an opportunity to change the equation, according to a blog published in UK Finance. APIs let companies automate low-value and staff-intensive manual tasks so employees can be more productive and happier in work, the blog said, with API integration also contributing to improved data quality and enhanced reliability. "Using real-time data, firms can make faster and better decisions, respond more rapidly to other parties such as auditors, and enjoy more efficient processes across their organizations."

APIs are indeed a "secret weapon" to streamlining operations in today's competitive landscape, according to the low code API platform Sensedia. They can connect and let data flow between different systems and applications, which reduces the need for manual intervention. This can be in the form of automation, where APIs cut down on human error and free up time, or in offering real-time access to information, allowing decisions to be made based on up-to-date information, enabling businesses to respond to customers more quickly. The efficiency gains by adopting APIs are undeniable.

"Real-time payments offer significant benefits for businesses, particularly through enhanced cash flow management and operational efficiency," wrote Iryna Mahalias, co-founder and CEO of PLANEKS, a Python development organization, in techUK. "With instant transactions, businesses can better predict and manage their cash flow, making timely payments and decreasing reliance on credit. Besides, real-time payments reduce processing times and minimize manual errors, resulting in cost savings and streamlined operations."

APIs in action

Many financial services companies are offering their APIs to give customers and partners new ways to bank and to create new experiences for end users. NatWest provides Payit™ Sending Payments: an API that enables end users to receive fast payments directly in their bank account.

JS Group, is a company that develops a platform to support the issuing of student bursaries. The company has integrated the Payit™ API into its flagship Aspire platform to deliver the ‘last mile’ of the service – the actual payment itself – to support a much better student and university experience. By using the Payit™ API solution, the company developed Aspire Cash – which helps to deliver cash to students much quicker and more efficiently than ever before; staff, for example, no longer have to manually collect, verify or process student bank details. Unlike traditional methods, Payit™ means there's no requirement to store any of this data and potentially create a data protection issue down the line. It's led to a cost saving of between 5-15%.

APIs have injected a new wave of innovation into not only the banking and finance sectors, but every organization that has a direct financially-linked interaction with a customer. By leaning on the principles of open banking, APIs have allowed organizations to build new applications and systems that are more advanced and user-friendly than they would have been otherwise, while helping to unlock internal and external benefits.