Real-time payments, smarphones and APIs

APIs are not only connectors for systems, data and applications, helping to create new business values, but also revolutionize instant payments. Payment APIs will drive digital transformation, soon you shall connect any API to integrate with any payment system, using any currency. How is this possible?

Current banking system was designed several dozen years ago, when nobody has heard about mobile phones, able to connect us with the world wide web. Today, in many places in the world, top-class engineers create systems where traditional banking is replaced by new solutions that are compatible with the needs of hyper-connected consumers. Consumers who do not part with their smartphones, because these devices have grown into completely new functions in line with individual preferences. 

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When talking about immediate or instant payments, they have to be distinguished from interbank payments that have been implemented in real time for many years, using RTGS (Real-Time Gross Settlement) payment systems, usually carried out by central banks (eg SORBNET2 in Polish National Bank or SIC in Switzerland).

Immediate payments are therefore retail payments made by individuals or legal entities. Several countries have introduced them in Europe – so far. Within the polish payment market, there is Express Eliksir payment avaliable and the payment service, available to BLIK users, which allows quick transfers to a mobile phone.

In the UK Vocalink supports FPS (Faster Payments Service) payment systems, billing and payment orders in real time. The Swedish clearing house Bankgriot established the Betalningar and Realtid (BiR) system and in Switzerland Central Bank operates The Swiss Interbank Clearing (SIC).

SEPA instant payments is in turn a system created for the needs of the entire European market. According to the Instapay blog, real-time payments are already available in dozens of countries around the world. 

They are used to carry out transfers within the global network. SWIFT (Society for Worldwide Interbank Financial Telecommunication), or Association for Worldwide Interbank Financial Telecommunications, which manages the data exchange network used by banks, is well known and the largest one. SWIFT is currently working on its modernization to offer a next generation network with the minimum latency and availability necessary for instant payments covering the global network. 
 
A slightly different approach is being represented by EBICS (Electronic Banking Internet Communication Standard), a German standard that requires communication with banks to be automated, according to procedures completely independent of banks. This is an alternative to the SWIFT network, being at the same time an open-source solution. It is introduced by banks min. in Austria, the Netherlands or the Scandinavian countries.

However, new players have appeared. Online payments system named Web Payments is an open source project in which a community of engineers and specialists builds a set of universal technologies to send and receive money over the Internet as easily as sending an e-mail. The main motivation of this group is to create a financial infrastructure resistant to attacks and external influences. 
 
This ecosystem, developed within the framework of the W3C Consortium, focuses not only on observing the basic standards of Internet architecture, but also on supporting the independence of the network, devices and its participants privacy protection. It takes into account that payers and recipients of payments can be people with different physical abilities and the level of digital competence. The technology would allow machine readings so they can be interpreted by programs (bots) and applications. 

There are many types of transactions in the world of payments, including those made between individuals and companies and conversely, between companies, between governments, and between private individuals. Thus, the payment process occurs between the payer and the payee, each of whom can be a person, business, institution or software agent. According to the creators of WebPayments solution, this process can be divided into 4 stages, which will be: negotiation of payment terms, negotiation of payment instruments, payment processing, product delivery (plus receipts and returns). Each of them can be described, standardized and included in the API.

One of the Web Payments system elements is the Payment Request API. It eliminates the need of forms use, which affects the flow of user activity in the purchase process. One can now easily use different payment methods to make a transaction. The money will go to the recipient’s account in a few seconds. An important element of the whole process is the user’s phone, so the authorization or other aspects of authentication are available from the device level, eg in the case of biometric solutions.

Payments API allows a website to exchange information with a user agent when it enters its input, before approving or rejecting a payment request. The request and acceptance of any payment takes place in one API call. 

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API Payment Request is an open and browser-based standard. It does not require the use of any specific payment system. It will use one agreed to by both sides of the transaction. It is an integrator of the elements of the process, making the browser act as an intermediary for sellers, users and payment methods. 
 
This solution enables secure payment processing, regardless of the technology. It works on any browser, device or mobile platform. And what is extremely important: in any currency, even in the crypto. 
 
The necessary information can be stored in the browser (eg on our smartphone), so that users can confirm and pay with one click. The goal, regarding good user experience will be achieved when the entire process becomes as simple as possible. 
 
With Web Payments, it will be possible not only to use existing payment schemes but also to launch new ones. Then, integrate them into applications and to earn from them. Large network of commercial connections between buyers and sellers will be a new business model for many organizations. 
 
For example, completely new benefits will be associated with micropayments, which will become just another payment interface. After setting up a new payment engine, you can create an entire ecosystem of related applications and services around it. The possibilities have no limits. 
 
At the time of writing, the Payment Request API is implemented in all major browsers. 

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Smartphones are used by only a small part of the world’s population today, and most of the adult citizens of the globe do not have a formal bank account. Not to mention the skill of making a transfer using the bank application on your phone. This is why, in Kenya and several other less developed countries, the M-Pesa system became successful, with its peer-to-peer technology allowing network members transfer funds via SMS.

In Australia, the New Payments Platform has been developed. A brand new financial system was initiated by SWIFT and built from scratch as a set of open APIs. Taking the advantage of M-Pesa system, the NPP has integrated applications for peer-to-peer payments for smartphones. And if the peer-to-peer payment supports the exchange of funds between two users, why would it not support the exchange of funds between two applications of the same user? In this way APIs can actually talk to each other, while doing sets of activities for us. We will issue orders by voice, gesture or click. And our smartphone will be a verified and authorized payment channel.

By equipping individual mobile applications with additional payment options, we will create new value chains. The NPP platform, which will be officially opened in 2018, wants to create a new economy built around mobile phones. Will fast cellular payments be essential basis for trading in the 21st century? If the number of smartphone users is expected to hit 5 billion by 2020, such thinking makes sense. It would only be worth to increase the life or resilience of these devices, which are today only called by “phone”.