Payment APIs 101: What they are and how to leverage them
Payment APIs help businesses accept and process payments without having to build out an entire financial product. Read the full blog post to find out what they are, how they work, and how to leverage them for your software
Payment technology has exploded over the past decade, allowing people to make payments from anywhere using the devices we love the most.
Some of the most innovative financial technology, such as instant payments, embedded finance and AI-powered financing all work with the help of APIs. Even as more innovative payment solutions become available, their impact would be limited without payment APIs.
Learn why payment APIs are a critical component for a modern software company (even for those not in finance) and why it’s essential to pick the right one.
What is a payment API?
A payment API is a specific type of application programming interface (API) that connects online retailers or e-commerce apps with a payment gateway to manage payments. APIs are especially useful because they integrate into a website or app and don’t require a full build-out of a new product.
With API protocols working in the background, they help businesses accept payments, process payments and even manage recurring customer billing agreements.
How do payment APIs work?
Each payment API is customized by the company that created it, so no two APIs will be identical. In the broader context of payment technology, the process looks like this:
- The software platforms gets code snippets or SDKs from the payment processor or gateway. Then, they add it to their existing app or site.
- After a customer purchases, the software platform’s app contacts the payment API and sends data about the purchase, usually as encrypted data or through tokenization.
- The API then sends the data to the payment processor or gateway.
- The processor verifies the transaction with the customer’s bank or card company to ensure there are enough funds and sends the approval or denial back to the payment API.
- The payment API sends the confirmation to the software platform.
One other feature of some payment APIs is webhooks. These are almost instant messages triggered by certain data events. For example, when a payment is attempted, approved or denied. Rather than waiting for a full report from the payment processor of the day’s transactions, a webhook sends status data as it happens, which can be a better way to troubleshoot payment processing issues.
Use cases for payment APIs in software products
Payment APIs are used to integrate financial services into various apps and websites. If it accepts payments, it is most likely eligible for an API use case. Common examples include:
Subscription services, such as cell phone service, streaming audio and video or food and wine clubs, may use recurring billing APIs to charge members on time each subscription cycle.
Online shopping sites like ecommerce stores use payment APIs on their checkout screens to allow customers to seamlessly complete purchases without leaving the checkout flow.
Mobile, desktop and console games offer in-game experiences and extras, many of which can be purchased through payment APIs.
Gig workers, merchants, truckers, and other service providers get access to instant payouts for a job well done. Learn how trucking companies use Astra’s payment API to improve access to funds, streamline payments for drivers, and speed up payouts to carriers.
Till is an innovative company that took Astra’s payment API and personalized it to bring families together over money matters. Its free debit card and family banking app get parents and children talking about their spending in a responsible way, and the instant payouts let them skip the ATM when investing in important family moments. Every engagement with the app (including payouts) supports Till’s look and feel and helps build trust with families.
Learn more about how Astra helps Till empower its users.
Ride-sharing and short-term rental businesses depend on payment APIs to handle customer payments, protect customer card data and make future purchases more seamless.
Budgeting apps and tools often import transaction data and update balances using APIs connected to external banks and lenders.
But there are many others. If a consumer can send or receive money digitally while using an app or software service, there’s a good chance a payment API is working behind the scenes to make it happen.
Key considerations when choosing a payment API for your software
On the surface, payment APIs seem pretty straightforward — and they can be! If you partner with the right payment provider, it will simplify your financial transactions, keep your customer’s data secure and help you grow your business.
However, not all payment APIs are the same. Prioritize the following to get the best experience for any use case.
Easy onboarding
APIs are designed to be simple. After all, they exist to help you skip heavy coding and development. Even with a practically plug-and-play code snippet, it may not take a long time to integrate, train your people on the API documentation and implement it into your existing workflows.
Ask a potential API rep what they do to help partners get up and running quickly, beyond just the code. For example, do they have a support team to troubleshoot issues if they occur?
Wide support for payment types
Your customers should be given at least as much choice in payment as they did before the API. If you can add another option (such as the instant debit card funding offered by Astra), that’s a bonus. The API should help you grow your customer base by supporting new payment methods as they roll out.
Security
One of the benefits of a payment API is that it handles payments and ensures you comply with financial regulations. To do this, it must be secure. Inquire about the practices used to follow PCI DSS standards and options for encryption and tokenization. You can also ask about past data breaches (if any) and what they would do to protect customer data during future risk events.
Personalization
While many payment APIs shine as plug-and-play solutions, this also leaves them unable to be completely customized to match your brand’s look and feel. At a minimum, ensure it can offer a payout UI that matches the rest of your app or website.
Transaction management
A payment API like Astra’s does much more than help customers pay for things; it should also keep you in the loop on how transactions are handled. Errors, declined transactions, ACH returns and other occurrences can slow your business down. The right API includes a dashboard or toolkit to help you monitor payments and look for useful trends about your customers and your checkout process.
Scalability
Implementing a new payment API when your company is small may not seem like a big deal, but what happens when you grow? Not only do you need to have a payment API that supports a changing volume of transactions, but the increased security risks need attention, too. A scalable API can be there as your business reaches new milestones, as well as quickly adjust for seasonal busy periods, such as during holidays or during a product launch.
Revenue growth
You may think of payment APIs as just a feature you can offer your customers to improve their app experience. However, payment APIs can also generate new revenue for your business. Moves, for example, created a brand new revenue stream from programmatic transfer fees that were charged when freelancers moved money instantly.
Customers have shown themselves willing to pay more for access to instant funds. If a company provides this option (such as through Astra’s instant payment solution), they can delight customers while earning more from fees.
Why Astra is the ideal payment API
Astra checks all the boxes on the must-have API characteristics above. But it doesn’t stop at just offering a secure, reliable and modern API gateway. It also goes further to offer solutions for more of your payments workflow.
Offerings include protected payments, automatic chargeback disputes, smart authorizations and premium support. Astra is well-versed in the challenges that business owners have and has created a robust toolkit to tackle those challenges head-on.
You’ll also see your payments in real-time through webhooks, as well as have a dashboard and full reporting for monitoring activity and informing future business decisions.
Learn why having Astra as your dedicated payment API partner is the best choice, and schedule a demo today.
