How open APIs can accelerate the rise of digital payments in India

Sanjeev Kumar

Even though India is still a cash-dominant economy, the payment services market has taken significant strides towards digital transactions - both in terms of value and volume - over the past few years. In fact, within two years of demonetization, there has been an exponential increase in digital payments that are fast becoming a norm. While the government’s push for cashless transactions is a key contributing factor, the growth of digital payments in India is also being pushed by the rise of the e-commerce and the changing preferences of today’s young and tech-savvy customers.

With the ever-rising penetration of smartphones and internet, Indian consumers are getting increasingly inclined to use cashless payment options to such an extent that rate of fintech adoption in the country outstrips the global average by nearly 6 percentage points. This is also benefiting businesses across the board, with merchants who adopt digital checkout options witnessing a boost in footfalls, higher sales per customer, faster payments and improved sales and transaction record-keeping.

With the cashless payments industry estimated to touch $500 billion by 2020, contributing to 15% to the country’s GDP, businesses that want to thrive in this landscape need to implement digital and new age payment solutions at the core of their point-of-sale (PoS) operations. Indeed, merchant payments are seen as the central aspect of all payment services for large enterprises as well as Micro Small & Medium Enterprises (MSMEs), which are increasingly becoming integrated with PoS and mobile-PoS terminal devices. However, traditionally, the payments industry has exercised tight control over end-to-end delivery - not only of products and services but also the user experience. Now, with the proliferation of the internet and smartphones, there is increased pressure on merchants to provide seamless and unique customer experiences - from onboarding to checkout. Sellers need to be nimble and innovative to take advantage of the available opportunities in a dynamic fintech ecosystem to come good on consumer expectations. A key enabler for such an engagement is the ‘open APIs’

In their early days, APIs were largely proprietary and meant for a company’s internal use. This meant that customization was not possible on such APIs because of their proprietary nature. The scenario is very different today. The emergence of open APIs, their role and importance has escalated to a whole new level.

Opening of APIs provides significant benefits to the companies which offer them to third-party developers who can build solutions on top of the existing APIs. APIs are the real enablers of innovation in payments, as they allow businesses and developers across the sphere to have access to information and services that can be used to create something new and innovative. Open APIs have the potential to fundamentally transform the experience of payments for end-users - ranging from individual customers to large retailers - mainly because of two reasons.

One reason is the rapid emergence of the payments industry, which is delivering a constant stream of innovative solutions focused on meeting customers’ financial services needs more effectively, especially in areas like payments and financial management for small and medium-sized enterprises (SMEs). Majority of sellers – including major corporations – need payment management and service experiences that mirror the speed, ease and convenience provided by consumer applications and devices. Through open APIs, payment service providers can help organizations merge their entire workflow - such as product checkout, EMI offers, customer feedback, and billing - on one system in a way that is best suited to their business.

Merchants must view payment processing as a complete digital experience solution that they are investing in to grow their business. The need for business agility in the day and age of intense competition demands that merchants leverage technology to their advantage in addressing their core business problems. Developers can use open APIs to not only integrate all forms of payments, but also build some innovative solutions on top of it.

Another important driver for adoption of open APIs is this need for delivering real-time services to the customers and information to the decision-makers. Keeping that in mind, the use of public APIs is the way forward to build products faster and tailored to the needs of the organizations.

At Pine Labs, we understand the role merchants can play in India’s transformation to a less-cash economy and how opening up of APIs can further enhance the digital services ecosystem in the country. In line with our vision of empowering merchants, we have opened the Android-based payment APIs for merchant-focused and other organizations to innovate. The open payments platform can point the merchants to a simple and seamless way to address payments, as opposed to some of the heavy liftings to be done if an enterprise were to tackle such endeavours on its own. This especially benefits the businesses trying to introduce a new product or service to customers as the payment part of it can be easily taken care of, with minimal resources. With the opening of APIs, merchants, enterprises as well as developers can focus on solving their core business problem and not worry about the payment APIs.

Clearly, the digital payment space is being transformed and the sector has witnessed tremendous growth, innovation and regulatory support over the last two years. Payment service providers need to actively embrace the move to open APIs to secure their role and position in the new ecosystem of financial services and transactions. And businesses that move now to build them into their operations are likely to race ahead, while those left behind may face playing catch-up in the years to come.

The author is Chief Technology Officer at Pine Labs. Views are personal.