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

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- and machine learning- backed analytics are necessary to make sense of data. Mobile commerce continues to grow, especially among millennials and Gen Z — whose combined spending power topped $3 trillion last year. Embedded payments are quickly becoming table stakes in the eyes of consumers who also expect seamless payments to be secure.

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 requires 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.

Payments providers and other relevant parties within the payment ecosystem can now 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 payments platforms for both the benefits they offer in product development but also 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. 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. 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 to launch 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.

APIs for a Growth Mindset

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 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 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. 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 key to ensure the quality of payments APIs.

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 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.

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