Payments are the foundation of global commerce. With economic activity expected to rebound from the prolonged pandemic, experts predict global payment volumes to grow by 11.5 percent through the year 2023. This increase in volume is set to challenge existing systems that were built to cater for manual processes, thus proving inadequate for the automated future. Innovations in the digital money movement that gained traction during the pandemic, from contactless payments to virtual cards, are here to stay. This change requires businesses to revisit their existing payment systems and processes, and upgrade towards transformative Application Programming Interface (API) platforms.  

A legacy of pandemic

The prolonged pandemic has placed a spotlight on the failings of the existing global payment systems – complex, fragmented, and slow. Legacy systems have been pushed to their limits by a population that went digital seemingly overnight. In order to realise a future of frictionless commerce, it is vital that global payments systems are revisited, with a focus on making improvements that will satisfy modern user demands for simplicity, seamlessness, and scalability.

Payments holding back business

Simply put, in their current form, payments systems are holding back business. This is due to several factors including a high reliance on manual processes, which makes payments slow. Many companies continue to operate using manual business-to-business (B2B) payment workflows – these are both time and labour intensive, with drawbacks including error-prone reconciliation, and delayed new supplier onboarding.

Following the issue of manual processes, there is a lack of interoperability due to complex and fragmented payment systems, processes, and standards. Essentially, business teams send and receive payments via disconnected systems across multiple platforms that work as batch-based silos. Payment counterparties often use different payment systems resulting in a lack of interoperability extending to payment messaging and data formats. The whole process is deeply inefficient and highly convoluted.

This is all complicated further by byzantine compliance regulations and changing infrastructure mandates. For example, regulations such as the fifth European Union Anti-Money Laundering Directive, the Second Payment Services Directive (PSD2), e-invoicing and open banking initiatives, add to complex compliance processes. These regulations must be navigated and can stall genuine operators in the payments market.

Lastly, there have been significant issues surrounding the integration of legacy technology platforms involved in payment processes. For years, companies have hard-wired siloed monolithic blocks on top of the existing legacy systems. As a result, their complex internal technology platform and business application landscape are hard to replace or upgrade to meet modern payment standards. Businesses that fail to integrate modern payment providers via real-time APIs are stuck with the old ways of batch processing or file sharing. This in turn makes payment processing significantly slow, manual, and costly.

Evolving the payments process

For the payments process to work for the businesses of today and the future, it must align with three significant core values – to be simple, seamless, and scalable.

Payments are at their core a simple process – it is people purchasing a product, service, or skills for a set amount of renumeration. It is a process that has been taking place since the first coins were minted, and there is no reason why the processes that facilitate payments today should not also be simple.

As society continues to embrace digital transformation, API technology can make this process simpler still by letting users acquire products or services without the need to confirm identity when consenting, and authorising payments. The payments process will become one in which customer experience is prioritised, as the public will have soaring expectations towards simplicity in purchasing.

In terms of seamlessness, this can be secured through making payments autonomous so that an event occurrence automatically triggers money movement. The need for identification while presenting a card, entering card details online, or tapping a mobile phone for contactless payment – these are all consequences of old messaging and payment networks based on identity. Frictionless experiences will phase-out this process of identifying oneself and then authorising payments.

This will be driven by technologies such as blockchain, distributed ledgers (DLT), smart contracts, tokenisation, and Internet of things (IoT) that, amongst others, when put together in a stack will push the boundaries of payments in the future – crucially, all these technologies can be combined in a single API platform for ultimate ease of use for businesses and their customers. This will make payments self-governing, seamless, and invisible.

Then, it comes down to scalability. Scalability is key to B2B transactions as the ability to send and receive money in large volumes is a service that enterprises and financial institutions expect from payments providers, however, managing the fluctuations in transaction volumes tests the scalability of payments. This is because payment volumes can be inconsistent with external factors such as business cycles, festive seasons, regulations, and so on, playing a key role.

Scalability can best be secured through rea- time APIs that will allow payments providers to integrate strategic partners across different stacks of their payment platform in order unlock new business use-cases. Strategic partners will be chosen based on their scalability and reach to ensure low, or zero, payment service downtime to clients.

The future of payments is now

The pandemic brought to the light the serious failings of current payment processes for the needs of businesses. However, this has made room for change and if the financial industry embraces the values of simplicity, seamlessness and scalability, the industry can be revolutionised on the behalf of businesses and their customers. As fintech evolves accordingly, companies must look towards API platforms that can combine these important traits in order to capitalise on a rapidly changing world of payments.