The U.S. Faster Payments Council’s Secure and Instant Payments API Work Group (APIWG) released a new white paper with a clear objective: to establish definitive best practices for instant payment APIs.
Although their focus wasn’t on creating new API standards, the work group dedicated itself to providing highly relevant best practices that can seamlessly support the diverse array of standards and proprietary APIs emerging within the industry.
One standout revelation from their research underscores the intrinsic link between the maturity of these APIs and the evolution of open banking infrastructure. A mature open banking infrastructure serves as the linchpin for seamless interoperability among banks, fintech solution providers, and payment networks. This advanced infrastructure not only facilitates easy connectivity of instant payment APIs across different platforms but amplifies the potential for widespread adoption, ensuring a broader reach and scalability for instant payment capabilities.
Recommended Best Practices for Instant Payment APIs
The group found that there are several best practices that can be implemented to accelerate the growth and adoption of instant payments. They are as follows:
- API registration should be automated.
- For user authentication, develop minimum defined standards.
- Provide additional payment data to enhance payment approval.
- Integrate quick look-up directory utilities to accelerate transaction initiation set-up.
- Embed risk management, fraud, and sanction screening controls to ramp up security and protect users.
More Collaboration is Key
The U.S. is facing its own unique challenges impeding the nationwide adoption of instant payments. A considerable number of large companies are still tethered to legacy financial systems that are not equipped to handle real-time payment processing. The integration of APIs into these legacy systems demands substantial investments and ongoing maintenance efforts.
Compounding these challenges is the prevailing lack of standardization in the U.S. instant payment landscape. The ecosystem is marked by fragmentation, with disparate payment networks and providers each wielding proprietary APIs and distinct requirements. The lack of standardization adds complexity, hindering companies from selecting APIs that would integrate easily across different platforms.
“Standardized instant payment APIs would help facilitate ease of adoption, interoperability, and scale,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Unlike some other countries, the U.S. does not have regulatory mandates for real-time payments. However, industry collaboration, such as the FPC’s APIWG, can help establish best practices and consistency for instant payment APIs, and make it easier for FIs and service providers to execute new use cases more efficiently.”
