What Are Payment APIs & How Do They Work?

What Are Payment APIs

Payment APIs give businesses more options for accepting online payments. This is especially important if you’re considering setting up a new business or moving your in-store business online.

A payments API provides the crucial link between a business’s e-commerce store and its payment gateway. Because payment APIs contribute to the security and smooth functioning of the payment process, it’s essential to choose the right payment API for your business.

What Does “API” Stand For?

The acronym “API” stands for “application programming interface.”

What Are APIs?

APIs are third-party modules that function as a go-between for two different pieces of software. They allow developers and site builders to use applications without the need to build the code themselves.

Developers must understand which features are available as an API and how to implement that API into a preexisting site. They can then upgrade or improve the site’s functionalities quickly and effectively.

APIs Often Need to Be Customised

Developers will still often have to make small adjustments or customisations to make the API work for each specific project. This could be something as simple as adding branding to the application or adjustments that are necessary to make it work on an alternative platform.

API creators often provide support to developers. This ensures that their API technology is used consistently and competently across all platforms.

What Are Payment APIs?

Payment APIs are APIs that help online businesses facilitate payments. They offer security, consistency, and seamless integration with a wide range of e-commerce platforms. They’re also beneficial from a business’s perspective as they take away the burden of meeting constantly evolving compliance regulations in-house.

A payment API can be offered by a payment processor or a payment gateway provider. In both cases, the goal is the same: to allow businesses to collect payments and customers to complete purchases without having to leave the business’s e-commerce website.

Payment APIs offer security measures for the business and the customer. Added security features make customers feel safe when making a purchase online and protect companies against potentially costly errors that can occur when in-house developers create their own payment solutions.

75% of Europeans bought goods or services online in 2022 (page 7 of the PDF). Ensuring security for businesses and the growing number of online shoppers is therefore of vital importance.

A Payment API Is One Type of Payment Gateway

There are three types of payment gateways: hosted, self-hosted, and API-hosted payment gateways. The third option offers a solution that takes some of the best features from the other two, making it an appealing solution for many businesses.

Why Choose an API-Hosted Payment Gateway?

Businesses should choose an API-hosted payment gateway because they can enjoy all the customisable features of a self-hosted gateway and benefit from the technical support provided by the company that produced the API. This is often a merchant account provider.

Payment processing through an API-hosted payment gateway involves integrating the payment gateway into the merchant’s website. However, the payment process will still be in line with your branding and any customisations you want to make.

API-hosted payment gateways are typically integrated into the checkout via a plugin or software module. This code will be pasted into your existing site to be branded and customised as you see fit. At Unicorn Group, for instance, we offer API modules for all the primary shopping carts. New software modules can also be created on request.

API-hosted payment gateways offer advanced payment options that allow merchants to accept payments from other countries using different payment methods. This is especially important for businesses in Europe that sell products across borders.

How Do Payment APIs Work?

A payment API works by connecting an online store with the merchant’s chosen payment processor at the checkout. The API connects directly to the payment network.

Benefits of Payment APIs

Payment APIs offer several benefits in addition to those mentioned above:

Adaptable to Your Business Model

Payment APIs are very flexible and enable many different payment types. For example, they can handle both one-off and recurring payments. This is beneficial for businesses that want to adapt the payment process to their business model. It also makes the payment process easier for the customer.

Customisable Features

Being able to customise payment APIs means you can tailor them to your business’s specific needs. This could include adding features that enable recurring payments. Real-time reporting features are also useful for businesses that manage a large inventory or receive a large amount of suspicious transaction requests.

Can Be Combined to Offer More Payment Methods

Payment APIs can also be used in tandem with other payment APIs from different payment solutions and gateways thanks to their ability to be customised. This is beneficial because it allows developers to combine the best features of several payment APIs or add a payment method when requested by the merchant.

Why Is It Important to Process Different Payment Methods?

It is important to be able to process different payment methods because this allows you to capture the maximum number of sales. Payment solutions are constantly evolving. 72% of European consumers engage with digital wallets like Google Pay and Apple Pay. This is in addition to more traditional payment methods like credit card, debit card, and cheque.

Automated Support

APIs typically offer retailers several automated support services. This includes verification of the customer’s payment information and fraud detection. Payment APIs also provide data in real-time on a transaction’s status and any relevant payment history. All of these features help merchants streamline their payment processes, reduce costly errors and fraud, and increase customer trust.

Business Types that Use Payment APIs

Many types of businesses can benefit from using payment APIs:

Online Retailers

APIs are primarily associated with online retailers that sell goods or services via e-commerce websites.

Brick-and-Mortar Businesses

Some brick-and-mortar businesses that take payments online might also use payment APIs.

Individual Business Owners

Freelancers and consultants are increasingly using payment APIs to facilitate payments from their customers.

Other businesses may use a payment API without even realising it. Anyone who accepts online payments is generally using a payment API.

How Much Do Payment APIs Cost?

The cost of a payment API will depend on which one you choose and the services offered. Some payment APIs are free of charge while others come with subscription fees and/or per-transaction fees.

How to Choose a Payment API

It’s important to do your research when choosing from among several payment API options. Take the time to find one that’s compatible with the technology you currently use and offers the services your business needs.

Basic features to look for in a good payment API include:

  • Ongoing technical support: Access to support staff and frequently updated manuals or resource guides
  • API client libraries: Cut-and-paste code in a common programming language to help businesses get going without spending a long time learning how coding works
  • Reliable, useful, and relevant updates: Automatic and when needed
  • Secure credentials: API keys or other security measures to protect access
  • Testing opportunities: An opportunity to try out an API before you take the plunge and take it live on your site

Customised Payment Processing Is Easy With APIs

Payment APIs can be moulded to your business’s payment processing needs—whether you’re running a very small local business or a multinational enterprise. The right payment API provider will understand your business and have the ability to scale with you as you grow.

An API-hosted payment gateway with a connected merchant services account is the perfect solution for online stores that require effortless payment processing and a wide variety of payment options. The right payment API will also offer security features to keep your business and customers safe.