Why is the industry developing an API framework?
Globally the use of payments related APIs has increased significantly, enabling partnerships between financial institutions, fintechs, government and the wider financial services ecosystem. We are also seeing a strong and increasing demand for payments related APIs in New Zealand. This is being driven by organisations looking to use APIs to interface with financial institutions. Although there are already many APIs being used between industry organisations now, there is no industry-wide standardisation of these.
Simplification and improving efficiency through standardisation are reasons behind the industry investigating the opportunity for setting up a shared API framework. A framework, particularly one that is right-sized, has the potential to improve system efficiency by reducing fragmentation, duplication of effort and deployment delays.
A well-functioning shared API framework will increase the ease at which organisations are able to partner and play a key role in bringing new innovations to market more simply and quickly.
We have been working with the industry on a project to establish common payment API standards. In March 2018, the industry commenced pilot activity to test two of these API standards between development partners.
What is the API framework?
The API framework has two components:
- Standardised APIs or API standards, two of which we are testing with development partners as part of a Minimum Viable Product (MVP) pilot.
- A supporting management framework, which will govern the API standards once they are released in market. The management framework will set out how organisations can access, use, and contribute to the development of the API standards.
In early 2018 we commenced design work with the industry on the management framework, and expect to have this completed in line with the end of the pilot. The components we are developing as part of the management framework are summarised in the image below:
What is the pilot?
The industry has been working to develop two common payment API standards to pilot: Account Information and Payment Initiation. These two standards have been chosen as they ease the process of digital transactions for the benefit of consumers, businesses and service providers.
The Account Information API will enable development partners to make pre-payment checks, such as confirming account details are correct and that there are sufficient funds to make a payment.
The Payment Initiation API will enable third-party development partners to set up and make an electronic credit payment by connecting directly and safely with bank development partners.
The pilot provides an opportunity to develop and test these standards using agile methodology.
A small group of development partners will work together to provide and use the APIs between each other and build the standards initially in test mode, and then in production beta mode as a closed user group. The development partners will feed valuable and practical insights into the refinement of the API standards and design of the framework.
The pilot is taking a minimum viable product (MVP) approach, where the aim is to get well-functioning common API standards and a framework to market as quickly as possible. We are responding to market demand which indicates there is a need to get these to market quickly due to the continued acceleration and fragmentation of payments related APIs across the market.
Alongside the standards work, the pilot working group is also investigating the development of an additional consent management API which will manage enduring consent across both pilot APIs. Enduring consent will allow customers to provide consent which remains valid for more than one transaction and simplify payment flow.
Who is involved?
Six development partners, who are a sub-set of the API industry working group, are participating in the pilot. There are three banks - ASB, BNZ and Westpac - who will build and provide the pilot APIs, and three trusted third party payment service providers - Datacom, Paymark and Trade Me - who will use those APIs. Alongside the development partners we have the continued engagement and support of our API working group organisations who are ANZ, Kiwibank and Merco Limited, distributor of POLi. These working group organisations continue to contribute to the pilot, standards development and the establishment of the API framework.
How will the pilot work?
The pilot is defined by five key phases of activity across development partners and the working group.
Phase 1: Internal build
Each development partner develops internal capability to have exposable APIs ready for bilateral testing and consumption.
Phase 2: Bilateral build
The completion of any bilateral integration work between development partners that is required before API go-live.
Phase 3: API go-live
Bilateral agreements are in place and the API is deployed.
Phase 4: Running the pilot
The pilot is run for a minimum of two months for each bilateral pair of development partners.
Phase 5: Standards finalisation
Using the standards feedback from throughout the pilot, the pilot API standards are revised and finalised.
Payments NZ API Pilot summary (341.4 KB)
What are the expected outcomes?
The pilot will conclude in late 2018, once development partners have completed the five phases of activity and the API standards have been finalised. It is expected to deliver MVP standards and specifications which are developed, tested, and have been used.
These standards will be refined, finalised and will be ready to be combined with the API management framework (which is being completed in tandem with the pilot) for release to the wider market.
How do I find out more?
Our API framework working group is currently developing 15 key areas of a management framework that will cover API access, standards and design constructs. We’ll be running a series of market testing workshops in September 2018.
Contact us if you’re interested in finding out more about these workshops.