What open APIs will mean for the future of mobile payments

It’s safe to say by this point that the launch of the Pay platforms, like Apple Pay, Samsung Pay and so on, haven’t exactly set the world alight.

Usage numbers remain difficult to come by, always a telling sign, and while growth may be slow and steady, it’s not the death knell for banks in the payments industry that so many expected and warned us about. Understandably many are now starting to wonder if the revolution is dead on arrival or simply on pause.

See also: Contactless payments just got easier in Singapore

The exceptions to this are of course the merchant led initiatives, like the ubiquitous Starbucks app, and similar offerings from companies like Dunkin Donuts, and Walmart Pay. That’s fine and good for very large scale brands who have the customer reach to gain that crucial real estate on a mobile device, but where does that leave the rest of the market? Perhaps more importantly, the limited success of dedicated mobile payment apps run the risk of making card issuing banks and indeed a lot of merchants complacent in their positioning as kings of the payments pile.

Perhaps more importantly, the limited success of dedicated mobile payment apps run the risk of making card issuing banks and indeed a lot of merchants complacent in their positioning as kings of the payments pile.

Mobile payments still a potential juggernaut

The threat  — or opportunity — of mobile payments hasn’t dissipated. It’s evolved into something different. The biggest shifts on the mobile payments front come from the rise of broader mobile ecosystem platforms. These are platforms that are multi-functional, mobile driven, increasingly global, and in many instances include a range of financial services embedded into another platform. While most payment executives don’t want to admit it, payments to most consumers are simply not an interesting proposition on their own and need that broader functionality to gain those critical user numbers.

The most visibly successful of these is mobile ecosystems is course Alipay Wallet, a platform that includes a host of social, shopping and other functions and holds user numbers that would make Apple’s eyes water. Rival Tencent’s WeChat Pay platform, which Ovum forecasts will reach 1.2 billion daily active users by the end of 2017, by contrast, embeds payments not only into social messaging channels but into the real world for use at the POS.

In India, we find the rise of Paytm, one of Alipay’s parent Ant Financials first big investment forays outside of China. Paytm like Alipay holds a variety of functions within the platform itself like bill payment, event ticketing and so on.

This focus on developing a broader ecosystem, lies at the heart of moves by payments providers like Visa to open up their technology capabilities via extensive API libraries. Whereas in the past Visa, or more often than not the telco’s, would have attempted to push themselves into the market as the big customer-facing brand that all other wallet participants would have to bow down to, usually for a price, they’re now moving to make themselves the centre of a broader ecosystem of developers and platforms. In essence, this is a strategic shift away from viewing

In essence, this is a strategic shift away from viewing fintechs as existential competitive threats to viewing them as partners, and avenues for further growth. The customer facing component may be weakened but does it matter if you’re still drawing the transactions?

APIs still core to new infrastructure

APIs aren’t new to financial services, and they form a core architectural component of much new infrastructure in terms of service orchestration and integration into what are typically very complex environments.

However, the regulatory mandates from the likes of PSD2 and Open API Banking Platforms are in many ways a Pandora’s Box set to open up a new wave of innovation we haven’t seen before. The hope is competition and transparency and openness will improve, but from the customer experience perspective, no one really knows what this might look like. With many banks looking to recoup their investments in things like immediate payments infrastructure, open APIs may be the lifeline they need to finally deliver truly engaging customer-focused overlay services.

For most banks and financial institutions, the shift to open APIs is more a challenge of mindset rather than a technology issue, although that also remains easier said than done. Most banks remain product-led in their thinking and are naturally conservative when it comes to partnership, openness, and sharing of data. However, as open API’s gain traction in financial services, this will likely lead to a renaissance of mobile wallet development and participation. The building blocks are now falling into place and where we go from here is anyone’s guess.

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