Payment validation made easy with an API

For all the technological advances of the past few decades, global banking is still handicapped by two frustratingly stubborn problem: human error and data error. Careless employees have helped cause several major hacking scandals over recent years, while the 2008 financial crisis was partly caused by reckless investors.

For all the technological advances of the past few decades, global banking is still handicapped by two frustratingly stubborn problems: human error and data error. These problems plague the payments sector.

If a domestic or international bank account number, or a bank or SWIFT code is entered incorrectly, the payment validation will fail, or - worse still - may go to the wrong account. Mark Bradbury, founder of Apply Financial, endured just this frustration a few years back. "I wanted to make a payment to the Philippines," he remembers.

"I went into my bank branch and gave them a typed version of the account details. They were absolutely correct, but then somebody entered it [incorrectly] into their system, so the payment failed."

Payment data errors

Thankfully, by collecting all the relevant data in an application programming interface (API), and helping customers to correct mistakes quickly, Bradbury and his team are well on the way to banishing these nuisances. Simplifying payments "is the reason we exist", he chuckles. "Historically, it was very difficult to recognise if the data you entered was wrong.

"You just hit the button and sent the payment, and then it would either go and get lost, or bounce back because the information was wrong.

"What we do is suggest how to fix [a potentially failed payment]. The client then fixes it. It's a straightforward process, and the emphasis is on the client to do the amendments." Apply Financial helps reduce the payment failure so clients' straight-through processes get to 99.99%. "We can never guarantee 100%, but we try to get as close to that as possible," he adds. This is a long time coming. After all, banks and customers have historically wasted huge amounts of time and money correcting payment errors, Bradbury explains. The figures involved are absurd.

"It costs the bank £50 on average to fix a payment," he explains. "We know from our data analysis in Validate API that one in ten payments needs manual intervention to fix, and you're doing 10,000 payments, that's [an expense] of £50,000."

The customer is often charged extra too, Bradbury continues. "The person who's sending it, who has perhaps typed in the information incorrectly is - quite rightly - charged by the bank. The bank will send them a penalty fee for a failed payment, and then they have to pay again to resend the payment. In the meantime, if the exchange rate has gone against them, the transaction costs even more."

Not using an API is expensive in other ways, too. For one thing, banks spend money hiring staff to check payments painstakingly by hand.

"Many banks have hundreds of people in the back office just doing manual payment entry and fixing payments," says Bradbury. "They have hundreds of people doing tasks that could be completely automated and digitised using Validate API."

Dealing with confused customers is another problem, he adds. "One client said to us that the biggest problem they had in their call centres was that they were getting something like 30,000 calls a month, because people don't know how to enter a payment properly."

Simplicity and security

Though many of these problems can be solved by using a cloud-based API, it took time to get banks on board after Apply Financial was founded in 2010. "I don't know what the day was when I woke up and a bank suddenly said, 'We'll take that,'" says Bradbury.

For one thing, banks were reluctant to invest in a start-up operation, while the company's cloud system also caused security concerns. "It all sounded a bit risky," Bradbury recalls.

To counter these worries, Apply Financial has invested heavily in making its system safe. "We have a private cloud with Sungard," Bradbury says. "The reason we chose them is that they provide pretty much all the major banks with [security and hosting] solutions. The second feature is that the private cloud uses the most updated and thorough security processes and protocols."

Although we don't handle payments as such, we have still made ourselves secure enough to be PCIDSS compliant, even though we don't need to be. Overall, we've invested time, thought and money into creating a world-class environment that clients can be confident in," he adds.

Ease of use

Apart from these security features, Bradbury is keen to emphasise how easy his system is to use. "We have one REST API that has access to dozens of really smart functions and all the global data," he says. "Once you plug the API into the channel that you want - whether it's a desktop app, a mobile app or a back-office application - you pick and choose the functions you want to take.

"We've also tried to make the online help and guides as simple as possible, so people can go live really quickly. We offer a free and completely secure, sandbox trial of our API. It's the real API, with real data and real functions.

"So when customers want to go live, they simply go from a test URL to a real production URL. We liaise with each company individually to understand their needs to make sure we give them the best results," he concludes.

Huge value

These benefits continue once customers go ahead and activate their API. By constantly updating its databases - including holiday data, suggesting banking codes by country and flagging payment errors in real time - Apply Financial's Validate API is bound to save clients money. After all, customers only need to increase their straight-through processing by only 0.25% for the service to pay for itself.

If certain details happen to not be on the API, Apply Financial will work hard to find them. "If a client comes in to make a payment to a bank and our system does not have the BIC code, for example, we'll go and source it for them," Bradbury says. "We'll go to the bank and find those details, then provide them for our client. It's all part of our support service."

At the same time, Apply Financial offers a secure place for clients to store their own SSI data, a key part of correspondent banking. "Some of our clients like to store their standard settlement instructions for the currency correspondence they do," explains Bradbury. "It's their own list, because they're sometimes a little reluctant to [publish it] through SWIFT.

"[Customers] can store all their correspondent data in our system and update it if they change a correspondent or stop using a particular correspondent. Effectively, it's a very smart repository where clients can manage all kinds of payment data. Overall, we're far more responsive than [just helping with] technical support," he says.

All of these features can also be white-labelled. Corporate clients are able to clean their payment files through Apply Financial's Validate API and Validate Browser, but make it look like the bank's own system in order to maintain a consistent brand identity.

Overall, Bradbury emphasises the long-term benefits of adopting the API. "There's huge value in the cloud API strategy for banks, and it's not just the cost savings," he says. "It's about knowing that once you sign up with us, you get all these additional functions and services, without needing to download a whole new system and continually manage in-house systems.

"Our clients know that we're constantly improving the software in the background, so they're buying into a long-term relationship. They won't have to worry about keeping up to date with data changes, compliance and changes in the law, and, in the meantime, they are receiving a significantly better customer experience."

Future plans

Though he is clearly proud of Apply Financial's successes so far, Bradbury is also excited about the company's future plans. Managing global data and helping clients make payments will stay at the centre of Apply Financial's work, but Bradbury and his team are also working towards the Second Payment Standards Directive (PSD2), a new set of regulations focused on bringing payments in line with the internet age, and very much an API future.

Despite a range of new demands - including tightening online security and giving customers more control over their data - Bradbury is confident that Apply Financial is well equipped for the changes. "We're ready," he smiles. "We're already prepared."

Apply Financial is also working on other projects "to help banks and other entities to identify fraud", Bradbury continues. "We're doing two releases: one around fraud and the other around sanctions. We built the fraud element in conjunction with a client, while we're still building the sanctions [element]. Both projects will help us extend our validation."

None of this is surprising. Bradbury and his team have been improving their API since Apply Financial was founded seven years ago. Going on their past successes, there is every reason to believe that they'll be helping clients simplify payments for many years to come.