Persistent trust issues and a hazy regulatory climate continue to hold back B2B adoption of faster payments among financial institutions (FIs), but nothing can stop it. Momentum is a powerful force, and it looks like there is enough behind open banking to finally clear the paper jam from B2B payments, making way for faster and more accurate digital transactions.
February 2020 B2B API tracker, Powered by Red Hat, offers an immersion in the subject, as application programming interfaces (APIs) are increasingly layered on the legacy payment infrastructure, creating a new central nervous system for digital transactions around the world.
More agile FinTechs are connecting
Cautious by nature and slow by design, legacy FIs worry about open banking architectures that lower the drawbridge for FinTechs. For their part, the latter furiously recycle and recondition the edge rails and make inroads. As more FinTech solutions take hold, the suspicion among gamers is fading as things clearly move towards fast digital money.
A change of perspective helped. FinTechs are more agile than most banks’ IT departments, and this allows them to visualize and iterate in ways we don’t usually associate with banks. What has emerged are exciting new ways to access and monetize banking services.
The last B2B API tracker gives many examples of how this is done. Trade and treasury solutions provider BNP Paribas, for example, is renowned for its strong API adherence, especially when it comes to using instant money.
“The benefits of APIs for instant payments [are] huge, ”said Charlotte Hausemer, vice president of innovation and product management for commerce and treasury at BNP Paribas. “What we do with instant payments and APIs is offer 24/7 [access to bank] services. [Real-time] gives e-commerce merchants and [business-to-consumer] retailers instant access to their funds [for] working capital and liquidity benefits. As more countries implement instant payments, it offers treasurers new ways of working, moving from batch processing to… real time.
IF, PME, Fintech look at each other
Banks and financial institutions are increasingly comfortable with real-time environments, as detailed in several use cases of the B2B API Tracker, such as Sage Intacct’s experiences in accounting, cost management and API-based automation. And Australian challenger FI Judo Bank uses APIs to integrate with smart credit solutions, lending, and compliance capabilities for small and medium enterprises (SMEs).
If they are trying to gain the trust of financial institutions on the one hand, FinTechs must also convince SMEs, which are not at all inclined to transmit financial data. A report by the Federation of British Small Businesses (FSB) found that less than 15% of UK SMEs share data with FinTechs, with holdouts citing privacy and competition concerns.
Among the light points detailed in the B2B API tracker are the many ways that platforms have embraced the API revolution. While ecommerce sites rely heavily on platform ecosystems, not everyone needs all services all the time. FinTechs do what they do best, cutting out discrete pieces of functionality, building their own perfect beast, and leaving the rest behind.
API access to unique platform capabilities is referred to as “headless commerce”. Expect to learn more about this as APIs infiltrate deeper into banking and B2B payments.