These days, most of what businesses and individuals do on the web involves interacting with APIs, or application programming interfaces, which are an essential pillar of many of the online services we have come to rely on.
In the payments and financial services industry, the interoperability of banking technology is just as important to stakeholders as checking out Beyoncé’s new Instagram post is to music fans. And the standardization of these more nuanced APIs is the key to interoperability.
To further discuss the future of APIs and how they have benefited the financial services industry, PaymentsJournal sat down with George Throckmorton, Managing Director of Advanced Payments Solutions at Nacha and Executive Director of Afinis, and Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group.
Afinis 101
At their core, APIs help businesses interact with payments and the data around those payments. It’s promising to see this technology implemented as a creative solution to many of the industry’s problems. However, initially much wasn’t being done in terms of standardization, which created challenges for businesses seeking interoperability.
So how did Afinis Interoperability Standards come to be? In essence, industry stakeholders determined that the APIs they used to interact with organizations all had subtle differences and that was becoming a challenge. “There was some consensus in the industry that standardization would be of value. We have seen standardization occur elsewhere around the globe, but it was mainly driven by mandate. We needed another approach in the U.S.,” Throckmorton said.
“Nacha, working with the industry, set up an organization called Afinis. Today, we have about 60 member organizations that are very diverse and of all sizes, including financial institutions, fintechs and service providers,” he said.
“By collaborating through both technical and business groups, Afinis is working to actually develop API standards for the U.S.—and maybe even on a global scale,” Throckmorton said.
“Combining both technical users who understand the data and business users who really understand API use cases is very important. If we are going to bring the industry together and create these standards, we all have to talk the same language.”
Afinis develops the APIs, then publishes the API standards on Afinis.org, where developers can discover the APIs and test them in a sandbox before implementation. Further adoption of Afinis API standards by organizations will bring efficiency and simplicity to end users, Throckmorton said.
“I understand you are taking on a tough job,” added Sloane, “but being able to have a single interface, and to train on it, know it, and then be able to go connect to multiple different parties through it is huge.”
How are APIs impacting the industry?
Afinis’ goal is to focus on the immediate needs of businesses. “There hasn’t been a lot of talk about data services for business, and this is where we think Afinis can go next,” Throckmorton said. “The data around a payment is so important to businesses. They need a way to consume that data.”
Other examples of data services that businesses can benefit from are APIs that can help them reduce fraud, and automate order-to-pay and cash application processes. “This is where we have focused our attention,” Throckmorton said. “And this is where businesses have said we can use the most help with APIs and the standardization of those APIs.”
For financial institutions and businesses, it is a matter of reducing technology barriers and cost via API standardization, while still providing competitive products and services. “So for Afinis, the question is: How do we leverage APIs and a network of APIs to allow these organizations to develop operational efficiencies so they can work better together in the back office?” Throckmorton said. “Standardization is key to that.”
The future of Afinis: What’s coming in 2021?
2020 was undoubtedly a unique year for everyone, but Afinis is committed to continuing its momentum, Throckmorton said. The organization plans to create and publish more APIs, with hopes that their adoption will see a solid growth pattern in 2021.
In addition, Afinis will continue working toward providing data services for businesses and supporting B2B payments. The reduction of fraud remains on the agenda, as well as automation through the supply chain. “It’s a good time, now that we’ve built this [system of APIs], and we have an infrastructure with Afinis,” Throckmorton said.
What is Phixius’ role in Afinis?
Nacha recently launched a new effort called Phixius, a payment information exchange platform that is comprised of several components: the technology itself, the rules that go into that technology, and the network of participants on that platform.
- Technology – Phixius is built on open APIs, blockchain, and smart contracts—cloud-based technology.
- Rules – It is important for companies to have governance over the participants using their platform and over the APIs used. This provides surety among all participants.
- Network – As with any kind of platform that is reliant on entity sharing or exposing information and consuming that data, a network of participants must exist on that platform.
Phixius officially launched on Oct. 31and is now onboarding the aforementioned participants—service providers, financial institutions, payment network and platforms—that will provide data services downstream to businesses and organizations.
It is not required that Phixius use Afinis APIs. If other API standards have already been created that Phixius can use to support its platform, then it has the capacity to do so. But due to Afinis’ work on API standardization, the expectation is that there will be a strong connection between Phixius and Afinis going forward,” Throckmorton said.
Here is a look at the suite of completed Afinis APIs:
- ACH Payment Initiation: allows businesses to submit standardized ACH payment instructions to their financial institution.
- Transaction Status: allows an Originator of an ACH transaction to check the status of a submitted payment instruction.
- Real-Time Billing Account Number Validation: enables bill pay providers to complete a real-time validation of consumer-entered account numbers directly with the billers.
- Bank Contact: allows originating financial institutions to quickly find and alert the appropriate contact within a receiving financial institution of potential fraud to prompt further investigation.
- Account Validation: ensures target accounts are valid and payments are posted as desired.
- Payee Profile: allows a company to obtain correct payment transaction details and remittance requirements to pay another company regardless of enterprise resource planning (ERP) system, business provider network, or financial institution
- Pay Me: enables a biller to route billing information electronically to any customer through any network.