11 Jun 2024
by Iryna Mahalias

The role of APIs in enabling real-time payments

Real-time payments enable instant fund transfers, helping businesses and consumers to send money quickly and securely. In the United Kingdom, such transactions are expected to continue growing through 2028 and have comprised about 10% of all payments in 2023, according to Statista. The ACI Worldwide report forecasts a 17% compound annual growth rate (CAGR) for the global real-time payment transactions through 2028, with instant transfers comprising nearly 10% of all payments in 2023. At the foundation of this seamless process are Application Programming Interfaces (APIs), which connect various financial systems and platforms, providing rapid data exchange.

This post explores how APIs facilitate real-time payments, outlining the benefits such as enhanced cash flow management and improved financial efficiency for consumers and businesses.

Understanding APIs and Real-Time Payments

APIs, short for Application Programming Interfaces (APIs), are sets of protocols and tools that allow different software applications to communicate with each other. They enable the seamless integration of various systems by ensuring standard commands, functions, and protocols. APIs facilitate the exchange of data and functionalities between different platforms. This makes it smooth and straightforward for developers to build and connect applications without implementing APIs from scratch, avoiding increased costs, timelines, and efforts, as well as reinventing the wheel.

Real-Time Payments Explained

Real-time payments (RTP) are instant transactions where funds are sent and made accessible to the recipient almost in a moment. In contrast to the traditional payment methods that may take several days to execute, RTP systems perform nonstop, guaranteeing that money moves quickly and efficiently. The significance of real-time payments in the modernized financial sector cannot be overstated. They provide a level of immediacy and convenience that caters to the fast dynamics of today's economy. The need for real-time payments reflects the growing demand for faster, more efficient financial services driven by technological advancements and changing consumer requirements.

How APIs Enable Real-Time Payments

APIs serve as the core of real-time payments by linking financial systems, payment processors, and platforms. They enable instant data exchange, allowing entities to communicate and process transactions swiftly. When a consumer initiates a payment, APIs connect their bank with the recipient's, verifying and processing details instantly. Technically, APIs request and send data in real-time, providing fund availability and secure transfers. They also enable transaction tracking and instant notifications, enhancing transparency and user experience. Using standardized protocols like RESTful APIs, financial institutions can quickly implement and scale real-time payment solutions, supporting global digitization in the financial sector.

Successful cases using APIs for real-time payments

A solid case of successful API employment for real-time payments is PayPal. Through its robust API infrastructure, PayPal equips customers, businesses, and financial institutions worldwide with immediate two-clicks-easy transactions. Companies adopt PayPal's APIs to seamlessly integrate payment processing into their platforms, delivering swift and secure transactions.

For businesses seeking to implement real-time payment solutions, it’s integral to partner with a reliable software development partner. PLANEKS is a trusted tech vendor specializing in third-party API integration and custom development, ensuring seamless implementation and optimization of real-time payment functionalities. With PLANEKS expertise, businesses can confidently navigate the complexities of API integrations and integrate handy instant payments to enhance their services for customers. PLANEKS collaborates closely with clients throughout the development process, ensuring that APIs are tailored to meet specific requirements and seamlessly integrate with existing software systems, ultimately driving operational efficiency and success.

Benefits for Consumers

Instant fund transfers offer convenience and security, liquidating the long wait time for transactions to clear and cutting down the risk of fraud. The transaction immediacy is particularly valuable in urgent situations. Real-time payments also enhance user experience, providing transparency through immediate notifications and transaction tracking.

Benefits for Businesses

Real-time payments offer significant benefits for businesses, particularly through enhanced cash flow management and operational efficiency. 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.

Conclusion

APIs are an inalienable intermediary for real-time payments as they seamlessly integrate financial systems and facilitate instant data exchange. The main benefits are faster fund transfers, greater cash flow management, and enhanced security. Future trends in this space incorporate the rise of open banking, increased adoption of blockchain technology, and the development of more sophisticated API standards. Adopting these innovations is essential for financial institutions and businesses to stay competitive and meet the growing demand for rapid, secure, and efficient payment solutions.


Andy Thornley

Andy Thornley

Head of Financial Services, techUK

Andy joined techUK in August 2022 as Head of Programme – Financial Services. His role includes leading techUK’s work in building a greater understanding of the 'technological art of the possible' in order to apply it to the reform and evolution of financial systems.

Before joining techUK, Andy worked for a number of other bodies in the financial services sector, including the British Insurance Brokers’ Association, where in addition to owning policy and public affairs, he was also responsible for fostering InsurTech in the sector.

Andy has a degree in Human Biology and holds a Certificate in Insurance (Cert CII) qualification from the Chartered Insurance Institute. Outside of work, Andy is an avid cyclist and races competitively both on the road as well as the velodrome.
Email:
[email protected]
Twitter:
@AndrewThornley
LinkedIn:
https://www.linkedin.com/in/mr-andy-thornley/

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Ella Gago-Brookes

Team Assistant, Markets, techUK

Ella joined techUK in November 2023 as a Markets Team Assistant, supporting the Justice and Emergency Services, Central Government and Financial Services Programmes.  

Before joining the team, she was working at the Magistrates' Courts in legal administration and graduated from the University of Liverpool in 2022.  Ella attained an undergraduate degree in History and Politics, and a master's degree in International Relations and Security Studies, with a particular interest in studying asylum rights and gendered violence.  

In her spare time she enjoys going to the gym, watching true crime documentaries, travelling, and making her best attempts to become a better cook.  

Email:
[email protected]

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Authors

 Iryna Mahalias

Iryna Mahalias

Co-Founder & CEO, PLANEKS