For many years, the opportunity to build experiences on top of financial data remained untapped. New types of financial infrastructure APIs are giving developers the ability to seamlessly integrate payments into their products, helping to unleash a new wave of payments-led innovation.
Katherine Degnen, Vice President of Product at Fidel, has been watching this innovation unfold before her eyes. Katherine oversees the development, commercialisation, and management of Fidel’s suite of financial infrastructure APIs. She is passionate about enabling developers to build powerful user experiences around real-time payments events, aspects of which she discusses at length throughout her guest post for The Fintech Times.
Over the past few years, regulations like PSD2 and practices like Open Banking have started to open the previously sealed doors of financial institutions. For the first time, developers have been able to leverage banking data to build a new generation of user-focused products. Lenders can provide faster credit decisions on loan applications. Wealth management applications can provide users with a comprehensive view of their brokerage and bank accounts.
When we hear the term Open Banking, the actual source of data remains unclear to many. In short, Open Banking data is really a digital summary of a consumer or business’s online account. This digital representation is certainly rich, but also has its limitations. It can take days for a transaction to appear on a bank statement and the data lacks details beyond a merchant’s name, the transaction amount, and date. For developers looking to build experiences to engage customers around the checkout moment, richer, real-time data is required.
Financial infrastructure APIs are filling this gap. These APIs allow developers to leverage payment card data and build programmable experiences around real-time payments events. Every time a card is swiped, dipped, tapped, or typed, it becomes an opportunity for a company to engage their users and create more value for their customers.
But how exactly is card data different from bank statement data? For one, it is processed instantly. That means companies can engage with their customers the moment they make a purchase, engaging with them in a moment that is highly relevant for them. For example, a financial API can enable automated delivery of a digital receipt the moment a card is swiped at checkout by instantly matching a customer’s card to said transaction. It creates a better checkout experience for shoppers and builds aggregated views of customer spending behavior for the merchants.
Second, transaction data is incredibly rich in detail, which is particularly important for loyalty and rewards programmes. It’s one thing to know a customer spent at one of your stores in the last three days, but it’s another to know at exactly which store location and when that person spent. This data helps companies create more personalised, targeted offers, that deepen engagement and more effectively market their brand to their customer base.
Layer on top of that functions like automated cashback capabilities, instant claim reimbursements, expense management solutions, or even omnichannel lending and financing options and you begin to scratch the surface of what that granular, real-time data can/could allow developers to achieve.
Payment cards are not going anywhere. Statista estimates there were roughly 22.11 billion cards in circulation in 2018, and they’ll be approximately 29.31 billion by 2027. Physical cash usage has been plummeting since the 2000s, displaced by contactless payments and digital wallets. Not to mention – the average credit card transaction is more than double the average cash transaction.
As for enrollment, having customers sign up to a programme has become as easy as logging into a WiFi hotspot. Mobile and web SDKs that exist today help onboard new users’ cards and can be embedded directly into a secure HTML iframe on websites or apps. In addition, it doesn’t require the same 90-day cycle of reaffirming login credentials that Open Banking applications do.
Most importantly, APIs put customers in control of what data they share and with who. All cardholders must consent to participate, and their card information is not stored or kept anywhere. Cardholders can at any time choose to stop sharing their data at any time, putting them in the driver’s seat.
These are just a few of the reasons we’ve seen so much interest and growth in financial APIs. They’re paving a secure and simple way to start capitalising on the most pervasive means of payment that exists today.