The term API might sound like a technical concept. However, you likely use payment APIs daily without even realizing it.
These seemingly tiny parts of the transaction process were designed to streamline payments, enhance security, and provide flexibility, which actually makes them a core part of payment systems, especially for merchants operating in high-risk industries.
But what exactly is an API? And, more importantly, what do you need to know about how they relate to your high-risk merchant account?
Keep reading to learn about the main benefits of these systems, key features to look for, and practical tips for implementation.
What Are Payment APIs?
API stands for Application Programming Interface. A payment API is a type of protocol that enables the use of payment software.
In a nutshell, these complex systems allow programs to connect and work together with other programs. In terms of transaction processing, however, APIs are the connecting links between merchants’ sites, commerce platforms, acquirers, gateways, and any other payment service providers.
The main purpose of such a system is to make the integration of processing tools into existing eCommerce systems seamless, enhance the processing capabilities, and overall help ensure that the ecosystem that facilitates the transactions is more secure.
These modern solutions have resolved the issues that came with predetermined payment setups that used to be “bulky,” overly complicated, and limiting in regard to processing capacity.
Nowadays, standardized APIs have revolutionized payment processing efforts with the endless advantages they can provide.
How Do Payment API Integrations Work?
Understanding the mechanics of API integrations can help you make informed decisions about your business and ensure a smooth implementation process.
What Payment APIs Can Do
Modern payment APIs offer a wide range of functionalities, all aimed at a better processing experience that include:
Processing Transactions: Modern APIs allow merchants to cater to a wider audience than ever before by facilitating various payment methods from classic credit card payments to digital wallets and even ACH checks.
Managing Subscriptions: Specialized payment APIs can also help simplify and manage the processing of your subscription-based services by setting up automatic billing on a finite or infinite basis, depending on your business’s needs.
Fraud Detection and Prevention: APIs help enhance the security of online credit card processing by providing built-in fraud detection tools and algorithms through AI-fueled user-behavior analysis to safeguard your business’ and your customers’ funds and data.
Handling Refunds and Chargebacks: Payment APIs can also assist in streamlining the processes for issuing refunds and managing chargebacks by monitoring transactions, receiving chargeback alerts, accessing data to resolve falsely initiated chargebacks, and automating chargeback response procedures.
Generating Reports and Analytics: The comprehensive reports payment API systems are able to gather can also give you great insights into market trends, demand, transaction history, and user-behavior for better business decision making.
The Backend Mechanics of Payment APIs
How do these systems function, though?
In simple terms, these programs work through a very technical process that consists of many tiny processes that allow the merchant’s system to communicate with the payment service providers’ systems.
Here’s what to know.
API Requests and Responses: The request and response procedure goes on behind the scenes through a chain of operations where one action triggers the next technical action, each of which sends signals that lead to a specific response. This sequence of steps is what, mechanically, facilitates procedures like authorizations, gathering data, keeping records, sending requests, and receiving responses with transaction statuses.
HTTPS (Hypertext Transfer Protocol Secure) protocols are one key part of this production line that ensures secure communication and safe data transfers. Essentially, it’s the secure version of HTTP, which is an application designed to convey information.
Data Encryption and Tokenization: These two links of the chain protect the whole process of transferring data. The processes of encryption and tokenization safeguard sensitive payment information by transforming it into codes that can only be transcribed with unique digital keys. Tokenization, however, trades the data for an arbitrarily generated token to add another layer of security.
Authentication and Authorization: APIs authenticate and authorize transactions using keys, tokens, and certificates to ensure secure access for all authorized parties involved. These systems help verify the identity of a user initiating an API request (the purchase, in this case). Authorization, however, controls the actions or data a user is allowed to access. OAuth is one of the widely used authorization systems that enables third parties to access information without compromising any sensitive data.
💡 Want to learn more about AI in payment processing? Check out our guide on AI Payment Processing: Industry Transformations, Tips & More. Or, if the talk about chargebacks above feels more relevant to where your high-risk business is currently at, read through The 8 Best (Tested) Chargeback Prevention Tips for High-Risk Businesses.
Why Payment APIs Matter for High-Risk Merchants
While any merchant selling their goods or services online would benefit from a payment API, for high-risk merchants, they’re even more important.
That’s because businesses in highly regulated trades face more risks and are more susceptible to fraud, therefore they need to take extra precautions.
So, it should be a top priority to work with a reliable payment provider who offers APIs, as it’s all part of helping you process transactions quickly and securely which in turn, keeps your business in good standing despite the risks.
If you’re not entirely sold on why, we’ve explored the main benefits of integrating payment APIs into your high-risk digital storefront.
Security and Compliance
As mentioned above, payment APIs come with some key security features such as PCI DSS compliance, two factor authentication, and end to end encryption. These ensure that all your transactions are processed according to the standards and sensitive data is handled accordingly.
By adhering to the regulatory requirements of your industry, you’re not only ruling out the risk of data breaches but also avoiding fines or account termination that can come from non-compliance.
Multi-Currency Support
Nowadays, most if not all merchants need multi-currency support for global transactions, despite the risk level, since everything is so global.
By employing a payment API in your business operations, you’ll be able to process transactions in various currencies, cater to a wider customer base, and tap into international markets.
This freedom not only expands your clientele, but also increases revenues and builds trust with your customers. All great things any successful business needs to grow.
Real-Time Reporting and Analytics
Having access to real-time reporting and analytics is, honestly, so important these days.
The instant insights a high-quality payment API can give you will allow you to analyze transaction trends, fraud attempts, chargebacks and monitor user behavior on the go. This makes it easier to make well-informed decisions at all times based on data-driven acumen.
At FastoPayments, we’re creating our very own CMS that will allow our merchants to view all kinds of critical diagnostics, from basic transaction data to market trends and target regions.
Integration Capabilities
If an API can’t be integrated into your platform seamlessly, it’ll cause more issues than it’s worth, obviously defeating the whole purpose of using one in the first place!
Look for payment APIs that can be integrated into existing systems smoothly, as this is what will enhance all aspects of the payment process.
Customizable Solutions
Customizable APIs can also provide great value to businesses in high-risk industries due to their business-specific and regionally varying regulations and needs.
So, even if two merchants operate within the same sector, they might need a completely different approach to how they process their transactions.
To paint the picture, a merchant that’s offering iGaming services globally might be in need of a payment API that comes with tools filtered for country-specific compliance scans.
Meanwhile a gambling merchant that provides their services locally might only be looking for an API with automated age verification tools and identity authentication.
Tips for Choosing the Right Payment API Provider
When selecting the right payment service provider for your high-risk business, there’s a lot to consider.
Especially since there are so many different processors on the market today, it can be quite difficult to decipher which one of them could actually improve your payment processing efforts.
We’ve listed the key factors to consider when you’re looking for a payment API that can have an impact on the outcome of the final integration and what can affect the payment APIs you’ll be able to access.
Reputation and Reliability
It’s always smart to do your due diligence on your potential business partners. I mean, they will be the ones handling the transactions after all, and I’m sure you’d like to be confident in their abilities, experience, and background before you hand over the finances.
So, look for a provider with a proven track record of successful merchants. You can often find this information by reading actual customer reviews (and not rushing the process).
Cost and Fee Structure
Remember, the cheapest option usually isn’t the best! In fact, it rarely ever is.
So, when you’re comparing rates, you should be looking at the price-performance ratio instead.
We would also recommend to ensure you understand all of the costs on your pricing proposal, as we’re sure you wouldn’t want to discover any hidden fees down the line.
Don’t overlook the tiny percentage fees either, as those are the ones that often turn into financial burdens in the long run. Examine the monthly costs along with transaction-based charges and don’t hesitate to ask questions.
Customer Support and Service Level Agreements (SLAs)
The quality of customer assistance a processor is able to provide you with is crucial when choosing the right service provider. We would recommend looking for processors offering 24 hour support as issues could arise at any time that require timely solutions and quick thinking.
Plus, be sure to go over the proposed SLA so you’ll know what to expect. The agreement itself should always outline clear processing, response, and settlement times.
Innovation and Future-Proofing
With the speed that everything is evolving at, it’s critical that merchants in high-risk sectors work with service providers who prioritize innovation in their solutions.
Future-proofing your payment processing efforts is the only way to ensure long-term success, stay ahead of industry trends, and keep up with technological advancements.
At FastoPayments, we believe that using AI as an assisting tool is a better fit for the payment industry. Since we’re not replacing jobs or watering down the industry, pr se, with useless products and pointless features. Instead, we’re actually helping out merchants by offering them a comprehensive understanding and overview of their client.
Best Practices for Implementing Payment APIs
Despite the progress made in the payment industry, many merchants still struggle because their developers are unable to effectively integrate everything.
That’s why we are working on an all-in-one system that’ll be tailored to each merchant’s needs based on their customer base, industry, market, transaction patterns, and operational workflow.
FastoPayments has four different gateways and four different APIs. The ones we suggest to our clients depend on their payment processing needs and other factors, like their customer base and operational workflows. However, most payment APIs do the same thing—the differences are in the smaller details
Planning and Preparation
Before implementing any payment API, you need to thoroughly plan and prepare ahead of time.
Merchants can do that by, firstly, assessing their current payment structure or needs (if you’re a startup).
As the next step, we suggest you gather all of your departments to pinpoint your main payment processing concerns and address potential issues. After that, you should be ready to start testing the API, which your processor will assist you with.
Also, remember to outline goals you’d like to meet to keep track of the progress and familiarize your team with the transaction infrastructure.
Testing and Quality Assurance
Testing the systems is another key part of this process. There’s no point in rushing this stage, as this is what will ultimately determine if the API is a good fit for your business.
So, it’s important to carry out extensive testing before you launch your site. The safest and easiest way to do that is through a “sandbox” environment to ensure the integration is actually seamless and functional.
Monitoring and Optimization
Once the testing and implementation phases are done, you can take a breath, but don’t get too comfortable just yet, as it’s still important to continue with on-going monitoring and optimization of the system.
Regular operational reviews, keeping track of KPIs, mistake rates, chargebacks rates, and processed transactions are just a few of the ways to ensure the system is working properly and updated when needed.
We're building out an all-in-one payment system so all you'll need is one payment API. We're looking to incorporate developer services so that we can help our clients customize or improve their APIs, because most clients have issues with their own developers. This will help us connect our customers with faster, higher-quality payment systems, which is our ultimate goal.
Partner with FastoPayments for Reliable Payment Processing
To sum it up, quality payment APIs have become quite a necessity for high-risk merchants, as they provide businesses in these trades the exact solutions they need to really thrive, from fraud prevention to simply streamlined transactions and increased security.
At FastoPayments, we take pride in the high quality of comprehensive solutions we provide.
So, if you’re looking for the best high-risk payment gateway and merchant account services, get a free, no-obligation quote for high-risk payment services here. We’ll review your business information and get back to you ASAP.
