October 21, 2020
The Speed and Security Benefits of Processing Payments via API
An Application Programming Interface (or API) is a popular method for applications on different servers to communicate with one another. The API functions as the intermediary between these different applications, delivering a request from one server to another and then sending the second server’s response back to the first. Basically, an API allows completely separate applications running on different commands to communicate and share data with one another in order to accomplish a task using each other’s functions.
One of the most common uses for an API has to do with payment processing. In fact, most people do not even realize that they interact with payment APIs when doing any sort of commerce online or purchasing items off of a vendor’s smartphone app or website. A payment API allows for smooth integration between all the players involved in digital commerce. This includes the customer, the vendor, the payment processor, the payment gateway, the customer’s bank, and the vendor’s bank. Needless to say, a payment API enables all these components to function together to process a payment almost instantaneously.
Prior to processing payments using an API, vendors would need to rely on an off-site third-party service provider for the entire payment process. This meant customers would be redirected to a different URL to interact with the payment interface before completing a purchase. Besides adding a significant amount of time to online shopping, routing customers to third party site opened the door for security risks. However, vendors preferred using a host site to handle all customers’ payment information to reduce liability. All this made for inefficiencies for both the vendor and customer experiences.
Payment APIs connect a vendor’s checkout page to a payment network, all while keeping the customer on the vendor’s site. From a business standpoint, a payment API leads to seamless user experience for the customer. One payment API can integrate an entire payment infrastructure, connecting mobile apps, social media extensions, and typical website checkout all into one payment network. Customer payment information is captured on the vendor’s site and then turned over to the payment API. From there, the API processes all the information to the correct channels (the payment gateway, payment processor, and merchant accounts).
Beyond reducing friction in the customer check-out experience, vendors can leverage APIs to enhance other aspects of their business. Payment APIs are able to collect transactions and purchasing data to analyze consumer behavior and patterns. As more and more tech companies pivot toward fintech, new uses and integration models for APIs will continue to develop. The versatile nature of APIs and smooth user experiences they can provide will result in more and more companies adopting an API approach to many aspects of business, especially payments.