Using APIs & the Cloud to Pave the Way for Faster Payments

The era of digitization is here – and it’s time to revamp traditional business banking services, such as vendor payables. Often frustrated by ineffective solutions, business customers are eager to leverage faster and more convenient tools in their accounting systems and ERPs. Among the most enticing options available on the market today are real-time payments.

Although not yet universal, the ability to make payments in real-time is quickly gaining traction. Four out of five banks plan to offer B2B real-time payments in the future. Better yet, more than 40% of commercial payment industry professionals believe the implementation of real-time payments in online banking will have a greater impact on the industry than any other innovation in the next three to five years.

To keep up with the competition and satisfy the demands of business banking customers, banks need to start transferring payment solutions to the cloud and enabling them with APIs. While most banks know they need an API strategy, figuring out how to develop and execute a plan of action isn’t all that simple. The rail using APIs to drive real-time payments is a natural candidate to get this ball rolling. From improved customer experience to greater efficiency, explore what’s driving the adoption of real-time payments via APIs and how the technology may evolve moving forward.

Reaping the rewards of real-time payments

More than 85% of banks see or expect to see enhancements in their customer service following the adoption of open banking and real-time payments. Meanwhile, an almost equal number of banks view instant payments as the driving force behind the growth and new product experiences for businesses.

However, when it comes to taking advantage of these benefits and ultimately enriching products and services with data from customers, banks should consider the accessibility of their offerings. Just because a product or service is made available through an API or the cloud doesn’t mean there will be an automatic increase in uptake.

Real-time payment solutions delivered via APIs and the cloud should simplify the customer journey from onboarding through to initiations and ultimately reconciliation. The easier it is for customers to access the products and services they need, the better chance banks have with raising awareness of their cloud and API-enabled payment solutions.

Bridging P2P capabilities

There are several ways in which banks can begin leveraging APIs along with the cloud to deliver greater value to their customers. No opportunity, however, is more pressing than global and domestic business payments. A bank’s business customers don’t often have the option of sending and tracking payments with ease, but all that may change with API-enabled solutions and the cloud.

Real-time payment networks, such as Zelle in the US and Faster Payments in the UK, have historically served a single purpose: peer-to-peer (P2P) transfers. Although such services were once revolutionary, they’re quickly becoming ubiquitous. By adopting real-time services and exposing them through APIs, banks stand to serve a much wider range of customers and expand the potential impact of real-time payment solutions.

Rather than only using an existing payment infrastructure for its original purpose, there’s an opportunity for banks to build on top of current P2P capabilities and set the stage for services that their customers desire. If, for example, a worker is leaving, his or her employer may leverage API-enabled real-time payment solutions from a bank to instantly deliver a final paycheck. With continued exposure through APIs and the cloud, the convenience of real-time payment networks can be applied to both consumer and business applications moving forward.

What the future has in store

Over the past two years, some banks have started leveraging real-time payment solutions via APIs and the cloud to better serve large corporate clients with sophisticated cash management processes. The benefits of real-time payments, however, may soon be felt by more than just industry leaders. Financial services management platforms are poised to weave real-time payment solutions and services throughout new applications, such as accounting and ERPs, thereby paving the way for increased transparency and efficiency. Instead of delaying payments by weeks or losing sight of where a payment is in a network, mid-size businesses will have the luxury of paying overseas suppliers in minutes.

Once a bank’s direct customers enjoy the benefits of real-time payment solutions, the next step in improving the business payments process is ushering in third-party payments. Given some of the regulatory considerations banks must take into account, at least two years will pass before real-time third-party payment solutions become a reality. But as developers begin testing their applications in public-facing sandbox APIs made available by banks, the chances are API-enabled real-time payment solutions from third parties may not be too far off.

Real-time payments continue to increase in popularity among banks. Moreover, considering the evolving preferences of business banking customers, it’s not difficult to see why. Increasingly accustomed to the speed and convenience that now defines B2C transactions, a bank’s business customers aren’t often willing to wait around for what they want. Banks have the opportunity to drive greater efficiency and value by shifting payment solutions to the cloud and enabling them via APIs.