What is a payments API?
APIs have become standard practice when adding new payment methods to your online experience. So what exactly are payment APIs and how do they work?
Offering a variety of payment methods used to be difficult for merchants. Each payment scheme — be it credit card, bank debit, manual bank transfer, open banking, digital wallet, buy now pay later (BNPL) or crypto — has its own infrastructure. What’s more, each provider may also have its own unique payment rails.Adopting just one method can take significant work for a merchant, from integrating the payment system with the rest of their tech stack to designing the customer experience and managing contractual obligations. Add more payment methods into the mix, and that burden becomes even greater. But increasingly, merchants are realising they can’t afford not to offer a variety of payment methods. After all, customers have specific preferences for how they want to pay. For example, Almost half of UK and Ireland shoppers (48%) said availability of different payment options makes them more likely to buy from a retailer. Making things even harder for merchants is that payment preference is far from uniform, but varies between countries, generations and even the type of purchase being made.Enter application programming interfaces (APIs) — a way for merchants to easily scale the payment methods they offer, and switch them on and off for different markets. What is a payments API?In technical terms, an API is a set of protocols and tools for building application software. Think of it as a connection between two distinct pieces of software. The API lets the recipient access software capabilities owned by the provider. By plugging into lots of APIs from lots of providers, a business can build sophisticated systems and processes that aggregate a suite of best-in-class services.When it comes to payments, APIs are typically offered by payment service providers (PSPs), third parties that have done the heavy lifting of connecting to the native payment infrastructure of each method. By leveraging these online payment APIs, merchants can quickly absorb new payment methods at a fraction of the speed and cost of having to work with each payment scheme provider on separate custom integrations.