A completely digital economy has “always been on the horizon” and now, thanks to the Covid-19 outbreak, that horizon has been “brought to the forefront” of business operations, the team at UK-based Fintech Modulr writes in a blog post.
Before the Coronavirus crisis, cashless payments had been the norm for many individuals and businesses, the Modulr team noted.
They also mentioned that cash payments have been in “steady decline since the year 2000, falling by around 10% every 5 years leading up to the pandemic.” And now, projections show that cash “could be completely eliminated, leading to a cashless economy by 2026,” Modulr reveals.
But traditional banking alternatives to physical cash are “still wrought with fees and inefficient practices,” the company acknowledged. And businesses are finding that these banking alternatives are not equipped “to deal with the modern instant economy and digitally demanding customers.”
Clients are looking for a financial system that will “allow them to spend and transfer money quickly and easily, leading more businesses to place more value on the online payment experience,” Modulr explained.
According to Modulr:
“At the heart of this financial revolution are financial APIs (Application Programming Interface) that facilitate Open Banking, like Modulr.”
Modulr is helping non-bank and Fintech firms “reinvent their payment infrastructure” by enabling:
- Faster Payments
- Faster Settlements and reconciliation
- Enhanced end-to-end experience
- API software allows businesses to set up their own payment infrastructures, outside of the traditional banking environment. In doing so, APIs are reinventing customer experience.
As explained by Modulr, an API is a type of software that “allows two different applications to communicate with each other.” For instance, consider an everyday app such as JustEat or Deliveroo. When you confirm your order and complete a payment, an API “handles the money transfer between your bank account and the restaurant’s payment processing system,” Modulr noted.
From the client’s end, the process “looks like a fairly simple affair. But, behind the scenes, that API is putting in the legwork,” Modulr explained. It also mentioned that a financial API such as Modulr provides the payment infrastructure for non-banking firms, “enabling fast and secure online payments between applications.”
As noted by Modulr, this works as an alternative to the traditional banking environment, “in which businesses would have to set up their own payment interface, and conduct any transactions through the bank.”
The Modulr team also noted:
“As the banks themselves aren’t always well equipped to deal with online transactions, this can lead to slow payments, expensive transfer fees, and an all-round inefficient process. After all, they’re banks, not tech companies. This is where APIs come in. Acting as a third party that can handle the payments between accounts, APIs are focused resources designed to offer a better payment service than a bank could on its own.”
While commenting on the benefits of APIs, the Modulr team pointed out that modern customers are “ditching cash in favor of online payments.” For businesses, this means “they need a seamless and secure payment portal if they’re to compete in the current market,” the Modulr team wrote in a blog post. They also mentioned that the problem is, “with traditional banking methods proving inefficient, non-banks and fintech businesses can struggle to find a payment infrastructure that can meet their customers’ expectations.”
Fortunately, however, API software can address this problem by offering:
- Faster Payments = API software “takes on the regulatory and operational tasks of plugging into payment schemes, meaning they can facilitate much faster payments between accounts than traditional banking methods.” Businesses will be able “to receive and make payments almost instantly, rather than having to wait for the cumbersome practices of old-school bank transfers.”
- Faster settlement and reconciliation – APIs can “facilitate much faster settlement, so accounts and debts are settled quickly.” This means users “know exactly what is in their accounts at any given time.” This is “coupled with faster reconciliation, so accounts accurately reflect all financial activity, allowing smoother financial management for non-banking businesses and FinTechs.”
- Enhanced end-to-end payment experiences via embedded payments – Embedded payment features “eliminate the need for customers to input account details over and over again.”
As mentioned in a blog post by Modulr:
“Any non-bank business or fintech can leverage the power of payments with APIs. At Modulr, we can bring your business into the modern era of fast and reliable paperless payments.”