APIs – that is, application program interfaces, or bits of code that allow two software programs to communicate with one another – are a hot topic and a hot commodity within financial services, as well as many other spaces. The API defines the correct way for a developer to write a program that requests services from an operating system (OS) or another application.
Companies often see APIs as a panacea for a myriad of business ills. But while it’s true that APIs can help solve certain problems, they can also create new ones that many businesses fail to take into account when deciding to implement them.
In the words of Cloud Elements CEO and Co-Founder Mark Geene, connecting systems to APIs is easy. Making them play nice with each other and with existing products and systems, however, is not – especially when payments are involved and various regulatory requirements must also be met.
In theory, “the last mile connects into the business applications used by the company making the payment,” Geene said. However, “payment services break down at the gap: A company may have a fantastic processor or automate their payables or receivables, but if that doesn’t integrate into the system the business is using, it still requires manual synchronization.”
In a live discussion with Karen Webster, Geene explained what businesses need to know before embracing APIs, and why payment processing partners can and should make it easier for them by delivering the last mile as part of their product or service.
The Scope of the Challenge
There’s no question that digitizing a business – including adding more applications or migrating to the cloud – is a necessary step in this day and age, but it’s only half the battle. To fully realize the benefits, said Geene, back-office processes must also be digitized.
He added that this is all the more true in the business-to-business (B2B) space, where data tends to be even more siloed, processes are often paper-based and more than half of payments are still made by check.
Businesses know it’s time to do this, yet around 90 percent are still relying on manual data entry for some payments. Their payment gateway sits outside of their core processes as a business, Geene said.
There was a time when an entire company would run on a single suite, but those days are long gone, noted Geene. Today, businesses leverage dozens or even hundreds of applications to manage the same processes. Systems that were once seen as singular – for instance, accounting – have been broken down into constituent parts: expense management, payables, receivables, et cetera.
These systems don’t just talk to each other. Thus, said Geene, the software market has become massively fragmented, and the more that businesses grow, the worse the impact, as more and more applications get added over their lifecycle. Geene said each app is like an island of data unto itself.
“Companies don’t realize when they implement apps, the burden falls on the business owner to hire integrators or buy integration platforms or other technology to synchronize the data between systems,” he pointed out.
Why APIs Alone Are Not Enough
FinTech companies and FinServ institutions recognize the need to bring their services and products into the ecosystems that are used by their customers. Often, their first step is to build and publish an API.
Yet even the largest banks and financial institutions (FIs) aren’t seeing the adoption they wanted or expected. Geene said that’s because, with millions of APIs developed just over the last few years, there are way more interfaces than there are developers to use them.
APIs provide a foundation to connect, but companies leave it up to their customers to find a developer to write to the API or hire a system integrator to make it work with their ecosystem. Geene said that’s why some vendors are now starting to see that it’s up to them to take more responsibility and lift some of that burden from their customers’ shoulders.
“Solve the problem from within your product,” Geene advised.
That, he added, is Cloud Elements’ goal. By packaging more than 130 prebuilt integrations, he said the company aims to make it easy for companies to connect with and manage a variety of business apps – including but not limited to payments – and reap the benefits of the business utilities they need without integrating each one individually.
What Payment Providers Need to Know
With so many apps already in the ecosystem, Geene said payment providers must take a good hard look at their position within the whole and ask themselves whether they are the system of record, or whether they need to fit into the process of another application or system.
Once a provider has been honest about its true role, Geene said it has the opportunity to think about taking more of the integration burden upon itself to make it easier for the customer. Ultimately, these are the providers that businesses will want to work with, since they make their jobs easier.
Defining the system of record is more nebulous than it used to be, though. Today, a real-time, dynamic view across the ecosystem is needed – with likely hundreds of apps in the enterprise, businesses can no longer rely on a single point, such as the accounting system.
Sales data lives in one place, accounting data in another and so forth. Contact and customer data don’t share a silo with company and vendor data. When it’s time for all of that to trickle down into the financial ledger, it will be necessary to pull information from several different systems.
In other words, truth is distributed throughout the ecosystem, with no single entity holding it all.
Use Cases
Cloud Elements’ VP of strategy, Ross Garrett, shared two examples of companies that worked with Cloud Elements to solve their last-mile challenges.
PaySimple, a provider of a SaaS-based online payment solution that offers integrated invoicing and payment acceptance in one system, was facing the same struggle that everyone in the highly competitive payment gateway space faces: attracting and retaining customers.
Garrett said PaySimple was looking for a way to not just enable customers to stay with the business, but to want to stay with it as a best-in-class option. It needed to create a sticky relationship with customers, while providing value.
To do that, Garrett said PaySimple needed to tie back its end-to-end process so that payments processed by the gateway could be reconciled and reported in real time with the merchant’s accounting system. He said Cloud Elements was able to deliver that real-time information flow to help PaySimple make it happen.
In a different use case, Garrett said Cloud Elements helped Tradeshift, a cloud-based business network that connects buyers and suppliers, streamline its supply chain management by seeing invoice processing from start to finish.
Tradeshift was facing the pain point of trying to help businesses transform and digitize supply chain relationships and processes. Working with Cloud Elements enabled them to connect to all the major accounting systems, he said.
Bottom line, according to Garrett?
“Adopting an application or adopting cloud services isn’t really helping you in any way,” Garrett said. “How do you actually tightly integrate these applications and services together? That’s where the value exists. Adopting an app is easy, but building it into your existing business processes, or being able to expand your existing business processes to leverage the capabilities of these new applications, is really what businesses are trying to achieve.”
He said that it’s the gap between systems of record and systems of engagement where evolution must continue in the days and years to come.
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