HOW API SAFEGUARD Bank-FinTech Collaboration
M AY 2019HOW APIS SAFEGUARDBank-FinTech CollaborationPage 6 (Feature Story)Deutsche Bank and Serrala partnerto launch instant, 24/7 year-round,cross-border paymentsPage 10 (News and Trends)How FIs are using APIs to supportopen banking and cross-borderpayments strategiesPage 14 (Deep Dive)
TABLEOFCONTENTSWHAT’S INSIDE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A look at the latest PSD2- and SEPA-inspired API paymentinnovations, and the partnerships forged to create better cross-borderpayment solutionsFEATURE STORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Ismail Chaib, chief operating officer of TESOBE and its Open BankProject, explains how FIs can offer APIs to improve security andprovide insightsNEWS & TRENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Notable headlines from around the B2B API space includingpartnerships, acquisitions and moreDEEP DIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14An examination of how APIs are transforming the cross-borderpayments worldABOUT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Information on PYMNTS.com and Red HatAC K N O W L E D G M E N TThe B2B API Tracker is done in collaboration with Red Hat, and PYMNTS is grateful for the company’s support and insight.PYMNTS.com retains full editorial control over the findings presented, as well as the methodology and data analysis. 2019 PYMNTS.com All Rights ReservedM AY 2019 2
What’sINSIDEThe financial landscape is changing. The revised PaymentServices Directive’s (PSD2’s) September deadline loomslarge, pressuring financial institutions (FIs) to comply,even as they work to meet other priorities — such as answering the growing demand for rapid-fire, cross-borderpayments. As FIs race to meet open banking requirementsand cater to international payments needs, many are turning to new application programming interfaces (APIs) tohelp. These solutions are playing key roles in connectingsoftware from different organizations, enabling them tounveil new services to customers.Some notable APIs are being developed to allow moreplayers to take advantage of faster cross-border payments options, such as the SEPA Instant Credit Transfer(SCT Inst) scheme, while others are helping banks takeadvantage of SWIFT’s global payments innovation (gpi).This month saw a spate of acquisitions, service launchesand strategic partnerships, all aimed at providing smoother business-to-business (B2B) and cross-border paymentsexperiences. In addition to these and other moves, the B2BAPI Tracker details the latest on what financial servicesproviders are doing to stay current in the space.AROUND THE B2B API WORLDcompany Serrala to launch the first API for the Single EuroPayments Area (SEPA). The first-of-its-kind solution allows corporations to instantly initiate payments throughGerman solutions provider SAP’s enterprise resourceplanning software.Six banks accounting for 85 percent of Spain’s crossborder market are also looking to advance cross-borderpayments via SWIFT gpi. SWIFT gpi participant banks canuse API calls to access the messaging service’s end-toend payment tracker.Other companies, such as American eCommerce softwaredeveloper BigCommerce, are taking closer looks at thesolutions they offer B2B merchants and creating innovative new takes. The company launched a B2B eCommercesystem for wholesalers, manufacturers and distributorsthat includes a services suite on a single platform. Thisallows merchants accomplish tasks ranging from automatically extending lines of credit, to maganaging logistics, to using machine learning (ML) to provide customizedbuyer shopping experiences. One offering leverages BigCommerce’s API to provide B2B eCommerce firms withcorporate account management, order forms and othercapabilities.In the ongoing effort to boost implementation of SCT Inst,Deutsche Bank has partnered with B2B FinTech software 2019 PYMNTS.com All Rights ReservedM AY 2019 3
W H A T ’ SI N S I D EExecutiveINSIGHTWhat kinds of APIs are critical forstreamlining cross-border remittances?“Pre-validation APIs have been introduced to reducefailed payments. However, I think APIs focused onmaking banking [or] beneficiary information available in a consistent way will fix the problem at thesource. This will go a long way [toward ensuring] thatcross-border remittances are as seamless as domestic money remittances. Tokenization of this information, with well-known locators such as phone numbersor other identifiers, will make it even easier for consumers and business to move money internationally.At the end of the day, it is about reducing [incorrect] payment details so that costly exception processingis not incurred.”How are APIs making it easier to developcross-border payments solutions?“Simplifying the data structure for collecting payment instructions makes it much easier to embedcross-border capabilities. ISO 20022 is quite richin features that cover almost any cross-border scenario. However, a simpler data model that covers themost common scenarios makes cross-border moneymovement more accessible and less complicated. At the end of the day, the cross-border API has to bestraightforward and easy [for developers] to use.”For more on these stories and other headlines fromaround the B2B API space, check out the Tracker’s Newsand Trends section (p. 10).THE SECURE, NECESSARY PATH TOOPEN BANKINGBanks’ SMB customers value using accounting softwareand other FinTech services that require access to theiraccount data. But to provide these features when banksdon’t offer APIs, FinTechs often turn to screen scraping and other less secure methods, according to IsmailChaib, chief operating officer of software companyTESOBE. In this month’s Feature Story (p. 6), Chaib explains how all FIs would be wise to embrace open bankingand make their APIs available to help improve security,gain insights and give customers improved offerings.DEEP DIVE: THE RISE OF APIs FOROPEN BANKING AND CROSS-BORDERB2B PAYMENTSWhile cross-border payments’ rise is a natural productof growth in the eCommerce space, faciliating suchtransactions is no small task. Some companies aresnapping up startups that have developed proven andeffective APIs, while big players like Visa and MasterCard are leveraging blockchain to compete in the ever-changing B2B payments landscape. Banks are alsolooking to APIs to help them comply with new regulations, such as PSD2.This month’s Deep Dive (p. 14) explores how APIs arehelping financial services providers and tech companiesteam up to comply with new regulations and bring innovative solutions to market.ALESSANDRO PETRONIhead of financial services strategy andsolutions, Red Hat 2019 PYMNTS.com All Rights ReservedM AY 2019 4
Five FastW H A T ’ SI N S I D EFACTS30050% 1.2TNumber of APIs the averageorganization managesPortion of B2B collaborationsthat occurred viaAPIs during 2018Estimated size of theU.S. B2B eCommercemarket by 202155%36%Share of IT managers whosaid API integration is criticalto their business strategiesPortion of businesses thatgain one-quarter or more oftheir revenues through APIs 2019 PYMNTS.com All Rights ReservedM AY 2019 5
FE ATURESTORYHOW APIsSAFEGUARDBANK-FINTECHCOLLABORATIONM AY 2019 6
FeatureSTORYOpen banking regulations like PSD2 are forcing manyFIs to open up their data to third-party providers (TPPs),causing a wave of changes as its September launchdate approaches. Changes are coming from elsewhere,too, with Australia mandating open banking by Julyand Israel working on an open banking API standard ofits own. Nations where FIs are not required to providedata access to TPPs, however, may be wise to jump onthe bandwagon.Small and medium-sized businesses (SMBs) often satisfy their accounting and similar needs by relying onsoftware and third-party services, requiring them to allow banking data access to their providers. But firmswhose banks don’t possess APIs to smoothly transmitthat information may resort to workaround solutionsthat have weaker security measures, putting customers’data at risk.Such solutions can also overburden FIs’ websites andleave banks in the dark about their customers’ wantsand needs, said Ismail Chaib, chief operating officer ofsoftware company TESOBE. The company’s Open BankProject offers an open source API platform to supportfirms’ open banking strategies. Chaib recently toldPYMNTS why FIs need to adopt open banking and howthe space is set to change in the coming years. 2019 PYMNTS.com All Rights ReservedAPIs VERSUS SCREEN SCRAPINGThird-party solutions that don’t rely on APIs can insteadturn to methods like screen scraping to pull informationfor enterprise resource planning systems, accountingsoftware and other offerings. Screen scraping requirescustomers to supply their bank account login credentials to third parties, though, increasing the risk of databreaches and making it harder for banks to keep customers’ details safe. On the other hand, FIs using APIscan promote more secure access to customers’ data,Chaib said.Screen scraping’s problems don’t stop at security, either. Third-party apps can also cause functionality issues by generating heavy traffic on banks’ websites.“Screen scraping puts a huge load and burden on the[bank’s] system,” Chaib said. “If you’re a bank where FinTechs are a big thing — like in the U.S. — you might have2 million customers. Imagine all 2 million customersreading your systems through screen scraping.”Chaib said APIs and their related management solutionscan help banks better control this traffic and managethird-party interactions. Additionally, banks can analyzeincoming API calls to assess who is accessing dataand why, allowing them to determine which servicesM AY 2019 7
F E A T U R ES T O R Ycustomers find most appealing and better plan their operational strategies.able to quickly find specific APIs, connect to them andstart coding right away.“Banks see a market for this,” Chaib said. “They canmonetize data, monetize the API, reduce costs andmake things more [efficient] internally. What wouldmake or break an API program [is whether it supports]the ability of banks to know, ‘What are the most-usedAPIs? What are people building today? What are peoplereally interested in in terms of use cases and apps?’”“It needs to be very easy [and] very quick to make yourfirst API call and start getting into it. The attentionspan across the board, and in FinTechs as well, is veryshort,” he said.CHALLENGES AND FINTECH NEEDSBanks can keep customers from turning to other services by providing their own APIs, and these solutionsalso help FIs gather more insights and reduce securityrisks. Banks can find it challenging, though, to determinewhich APIs will appeal to FinTechs and encourage themto create the services that end customers want.The APIs that most appeal to FinTechs are easy to useand tailor, Chaib said. Many developers prioritize being 2019 PYMNTS.com All Rights ReservedFinTechs also often desire sandbox testing environments with sample data. This helps them demonstratetheir service proposals before they decide to pursueformal bank relationships. Chaib claimed FinTechs areespecially peeved when banks close their developerportals after short testing periods and don’t follow upwith developers on how the FinTechs can roll out thesolutions they had been working on.Banks also need compliance strategies to smoothlywork with FinTech developers worldwide. This could require them to maintain different open API specificationsto satisfy each region’s regulations and framework,M AY 2019 8
F E A T U R ES T O R YF E A T U R ES T O R YUnder TheHOODincluding France’s STET, the U.K.’s Open Banking andthe pan-European Berlin Group standards.“Because of regulations, because of companyspecific peculiarities, banks will end up having multipleAPI standards they will have to maintain and to manage,”Chaib predicted.FIs around the world see great potential in offeringopen banking APIs, even if they’re not required to do so.Offering such solutions will allow them to draw morebusiness, manage traffic, gain new customer insightsand improve security. Not just any approach will do,though, and FIs must cater to FinTechs’ unique needsto encourage the latter to leverage their APIs. If all goessmoothly, FinTechs, FIs and end customers all stand toreap the benefits.The Open Bank Project supports a varietyof industry standards. Do you anticipatethat there will be a movement towardmore universal open banking regulations,and would that be desirable?“In the end, banks will end up managing a different setof APIs. In Europe, you would have a bank supporting the Berlin Group, or a bank in France supportingthe STET national standard just because they haveto for regulatory reasons. But at the same time, thatregulatory specification doesn’t attract so many developers. They have, say, three, four or five FinTechpartners they really want to work with, and they wantto give them more APIs and services than what’srequired by the standard and better specification sothey can be more productive. They’d have a differentAPI specification for these privileged partners. Theymay then have another set of APIs based on the OpenBank Project standard that plugs them into [our] global, 10,000-member [developer] community.In the end, the same will happen in Singapore, [whereopen banking is voluntary] and in different places[as well]. Banks will end up managing different APIstandards and specifications. [Is] a global standardneeded or required? Definitely. I think standardizationbrings costs down and is good for FinTechs. [Withstandardization,] FinTechs know they can developsomething and it’ll run everywhere.”ISMAIL CHAIBchief operating officer of software companyTESOBE and the Open Bank Project 2019 PYMNTS.com All Rights ReservedM AY 2019 9
News andTRENDSCross-Border PaymentsDEUTSCHE BANK, SERRALA LAUNCHAPI FOR INSTANT PAYMENTSThe European Payments Council developed SCT Inst in2017 to improve cross-border payments efficiency forits 36 European Union member states, but the solutionhas largerly been accessible only through proprietarybank solutions. APIs are changing that, however.Deutsche Bank recently partnered with B2B FinTechsoftware company Serrala to launch the first API forSEPA, an offering that automates payment processesto enable speedy transfers. Under SEPA’s standards,payments must be processed in less than 10 seconds,24/7 year-round. This is the first API that allows corporations to instantly initiate payments through enterpriseresource planning software from German solutionsprovider SAP.SIX SPANISH BANKS ADOPT SWIFT GPIGlobal financial messaging service SWIFT’s crossborder payments solution continues to gain traction,too. Six banks that account for 85 percent of Spain’scross-border market have signed up to use SWIFT gpi:Banco Sabadell, Banco Santandar, Bankinter, BBVA,CaixaBank and Grupo Cooperative Cajamar. The service delivered 40 trillion in cross-border paymentslast year, and today it sends roughly 300 billion in dailycross-border payments. SWIFT gpi participants can use 2019 PYMNTS.com All Rights ReservedAPI calls to access end-to-end payments trackers, andthe messaging service continues to test and develop additional capabilities.“We look forward to launching a series of new functionalities, including pre-validation and case resolution, andto announce the results of our proof-of-concept worklinking SWIFT gpi to eCommerce and instant paymentsplatforms,” Juan Carlos Botrán, head of SWIFT Iberia,said in a statement.CANADIAN STARTUP TO LAUNCHINSTANT CROSS-BORDER PAYMENTSNew players are also joining the space, including Canadian FinTech company Buckzy Payments, which specializes in cross-border payments. It recently launched apayments ecosystem network and technology platformthat offers APIs for banks and service providers.Cross-border payments typically take several days orweeks to settle and involve trips to the bank and fillingout paperwork, but Buckzy is attempting to addressthese issues. It claims its offering will enable paymentsacross international borders 24/7 year-round at nocharge, with transfer times of less than five minutes. Inaddition, the platform will offer users payment optionsaccessible via digital wallets with mobile reload.“Some countries are further ahead than others, but, overall, payments architecture is not evolving fast enough. The cost of this lag has been extremely significant tobusinesses and consumers, who, until now, have beenM AY 2019 10
N E W SA N DT R E N D Sovercharged and inconvenienced by [the] lack of payments options,” CEO Abdul Naushad said.Partnering For Better B2BPayment SolutionsAMERICAN EXPRESS, SAP ARIBAANNOUNCE PARTNERSHIPOther firms are turning to collaborations to advancetheir services, including American Express andcloud procurement platform SAP Ariba. The pair arepartnering to facilitate B2B payments that will allowmerchants to use a single platform, combining the former’s payment capabilities with the latter’s network.The platform will offer easy reconciliation, commerceand secure payments.“With over half of American Express’ largest globalcustomers already using SAP Ariba to manage their expenses, this partnership has the opportunity to providesignificant value for our joint customers,” said E-Bai Koo,executive vice president of global commercial servicesat American Express. 2019 PYMNTS.com All Rights ReservedN E W SA N DT R E N D SMASTERCARD, FINEXIO PARTNERINGON SUPPLIER PAYMENTSAmerican Express isn’t the only major card player focusing on collaboration — Mastercard is also workingwith a new partner. The company teamed up with B2Bpayments network Finexio to improve its supplier payments services. The latter will allow customers to useMastercard-branded virtual cards to pay vendors as partof a broader effort to boost digital payments.Last year, Mastercard rolled out a platform that connected buyers and suppliers to facilitate payments.The financial services giant hopes to provide an alternative to using paper checks for accounts payable, instead tapping quicker electronic solutions that requireless paperwork.BENTO FOR BUSINESS, VISA LAUNCHNEW PAYMENT SOLUTIONMastercard rival Visa and B2B payments solutionsprovider Bento for Business recently announced a newsolution to help SMBs manage their funds. SMBs usingVisa’s products will now have access to Bento’s budgeting, bookkeeping and expense management offerings.They will also be able to gain cash flow insights and access to customized services based on their purchases.M AY 2019 11
N E W S“The Bento solution will evolve how cardholders andmerchants manage expenses and gain insights into theircash-flow and financial management activities,” DavidSimon, Visa’s global head of small and medium enterprises, said in a statement.BIGCOMMERCE UNROLLS NEWeCOMMERCE PLATFORM FOR B2BMERCHANTSMeanwhile, American eCommerce software developerBigCommerce recently collaborated with six technology partners to launch a B2B eCommerce platform forwholesalers, manufacturers and distributors. The newoffering features a suite of services, including one thatallows merchants to automatically extend lines of credit to buyers. It also folds in the Brightpearl platform,allowing omnichannel merchants to manage theirfinance, inventory, purchasing, returns and logisticsneeds via a single system.Other services include the Bundle B2B solution, built bySILK Software using BigCommerce’s API, which helpsmerchants perform corporate account management andoffers customers quick order forms. Additional platformcapabilities include a service that leverages ML to offerpersonalized shopping experiences, recomme
Deutsche Bank and Serrala partner to launch instant, 24/7 year-round, cross-border payments Page 10 (News and Trends) Page 6 (Feature Story) How FIs are using APIs to support open banking and cross-border payments strategies Page 14 (Deep Dive) HOW APIS SAFEGUARD Bank-FinTech Collaboration.
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