New standard will allow instant loan approval flow between banks and retailers
As part of an industry collaboration involving banks, merchants and technology providers, SWIFT has published a new API standard for the ‘Pay Later’ payment model, which is gaining traction globally. This model gives consumers an innovative and flexible payment option when completing online purchases.
How does it work?
Pay Later gives e-commerce customers the opportunity to pay for goods or services in instalments with a simple loan provided by a regulated bank.
By selecting Pay Later during the checkout process, customers will be shown loan offers and the schedule for repayment, before accepting an offer. Once a loan is initiated, the funds are immediately credited to the merchant, and the transaction completed.
This provides a three-way benefit:
- The customer gets funding from a trusted and regulated bank.
- The merchant makes a sale.
- The bank gets a loan on its books from a customer it knows.
Delivering excellence through standards
As customers buy goods and services from different merchants and use different banks to provide the Pay Later service, rapid and widespread uptake requires standardisation.
If each bank offered a different API, merchants’ implementation effort would increase, and new investment would be required for each new bank connected.
With the API and workflow rules standardised, however, the incremental cost for a merchant to work with a new bank (or a bank to work with a new merchant) is significantly reduced.
A working group of banks, merchants, technology providers and SWIFT has codified and published the initial version of the standard API specifications which can be easily implemented consistently by all parties.
SWIFT provides a neutral venue for collaboration, standards and payments business expertise, a platform for capturing, publishing and testing specifications and a fair IP policy that ensures all participants can contribute with confidence.
The expectation is that building out the Pay Later API standard will ultimately facilitate an ecosystem for a broad range of participants to tap into this new technology.
Stephen Lindsay, Head of Standards at SWIFT commented: "SWIFT has long been at the forefront of banking standardisation and is continuing this work in the API world. Our work on Pay Later is a good example of how standardisation plays a vital role in ensuring the industry can take every advantage of technological innovation."
The API will enable banks to maintain the vital lending relationship whilst driving growth of the global digital economy.
Anne Carøe Hald, Global Head of Payments Products at Danske Bank said: “Pay Later is an opportunity for banks to serve their customers better; to offer appropriate finance where and when customers need it. The ability to provide services in this way - seamlessly integrated in customers’ on-line lives - will be key for banks to thrive in the digital economy.”
Christer Holloman, CEO at Divido said: “New digital ecosystems are emerging that create magical customer experiences for millions. Financial services will be part of that transformation and become invisible enablers of the customer journey.”
Continuing to evolve
Version 1 of the API standard has been published on SwaggerHub, and can be accessed by clicking here.
With the publication of version 1 of the API specification, participants will now commence pilots involving merchants, marketplaces, fintechs and banks.
Work will continue between industry participants to develop value added API standards on top, and drive further growth. SWIFT welcomes contributions from the industry in continuing to evolve the Pay Later standard.
Read the full announcement