Application Programming Interfaces (APIs) play an essential role in connecting different software systems, allowing them to exchange data and functionality.
As far as payments are concerned, APIs enable web and mobile applications to accept payments (pay-ins) and send payments (payouts) by ensuring that all entities involved in those processes can “talk” to each other.
In this article, we’ll explore payment APIs with an emphasis on payout APIs, including what they can do, top benefits, and the different types of API architectures you can find today.
What are Payment APIs?
Payment APIs are software tools that allow companies to integrate payment processing functionality into their applications, websites, and other digital platforms. These APIs act as intermediaries between the business and the payment processors that handle the transactions. They facilitate the secure transmission of payment information between the two, ensuring that payments are processed quickly and accurately.
Payout APIs vs Payment Gateway APIs
Payment gateway APIs help ensure a seamless customer experience by offering a variety of secure and easy-to-use payment solutions for ecommerce. On a high level, these payment APIs work by serving up a customer with the payment amount owed, various payment methods to make said payment, and then sending it to a merchant account.
Payment APIs can accommodate online payments in various forms, including bank transfer, debit card, credit card, ACH, or via payment gateways such as Apple Pay, PayPal, and Google Pay. Whether you have an e-commerce, B2C, or B2B business, payment APIs can provide a seamless checkout experience for your customers.
Payout APIs are essential tools for businesses that need to distribute mass payments to multiple recipients such as contractors, freelancers, creators, streamers, affiliates, publishers, suppliers, and more.
Payout APIs allow payers to quickly and efficiently disburse payments at scale to payees across the globe, in multiple currencies, and in various different payment methods, including US ACH, international ACH, wire transfer, PayPal, prepaid debit cards, and more.
As an example, a live streaming service company like Twitch needs to regularly pay its millions of streamers for the content they produce and could use a payout API to execute these payments.
How Do Payout APIs Work?
Payout APIs can perform various functions, depending on the specific needs of the business. Some of the most common functions of payment APIs for payouts include:
- Mass Payouts: Payment APIs can be used to disburse payments to multiple payees or recipients at once, streamlining the payout process and reducing the amount of time and effort required to manage payouts.
- Automatic Payouts: Payment APIs can also automate the payout process, ensuring that payments are disbursed on a pre-determined schedule, such as weekly, bi-weekly, or monthly.
- Payment Status: Payment APIs can provide businesses with real-time information on payment status, including details such as the amount paid, the date of payment, and the payment method used.
- Payment Reconciliation: Payment APIs can help businesses reconcile payments with their accounting system, ensuring accurate financial reporting.
- Compliance: Payment APIs for payouts can also help businesses comply with regulatory requirements, such as Know Your Customer (KYC), Anti-Money Laundering (AML), and other legal requirements.
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What are the Benefits of Using Payout APIs?
There are many benefits to using payout APIs for your business. Some of the most significant advantages include:
- Increased Efficiency: Payment APIs help businesses streamline their payout processing workflows, reducing the amount of time and effort required to manage payouts.
- Improved Payee Experience: Payment APIs improve the payee experience by providing a fast and convenient payout process, which helps to increase loyalty and satisfaction.
- Reduced Risk: Payment APIs employ robust security measures to protect against fraud and other payment-related threats, reducing the risk of financial loss for businesses.
- Increased Transparency: Payment APIs can provide businesses with real-time information on payment status, ensuring transparency in the payout process.
- Competitive Advantage: Businesses that use payment APIs for payouts can gain a competitive advantage by offering a fast, convenient, and secure payout experience to payees and recipients.
REST vs SOAP APIs for Payouts
With the rise of web-based applications, two types of APIs have emerged as dominant standards, the Representational State Transfer (REST) and Simple Object Access Protocol (SOAP). While SOAP has been around for quite some time, REST APIs have gained immense popularity in recent years due to their simplicity, flexibility, and ease of use.
REST API
REST (Representational State Transfer) is a web-based architecture that uses a simple URL structure and HTTP protocols to facilitate communication between different applications. REST APIs are known for their simplicity and flexibility, making them easy to use and integrate with existing systems.
REST APIs are also highly scalable due to their stateless nature and support of caching mechanisms, which can significantly improve performance. They are a popular choice for developers who want to create scalable and maintainable systems. Here are some of the benefits of using REST APIs:
- Easy to use: REST APIs are simple to use and require minimal setup. Developers can easily create and manage endpoints, making it effortless to update and maintain the API over time.
- Scalable: REST APIs are highly scalable, making them ideal for companies that want to grow and expand their operations. With REST APIs, you can easily add new endpoints and make changes to the API without disrupting existing systems.
- Platform independent: REST APIs can be accessed from any platform or device, making them available to a wider range of users.
- Better performance: REST APIs are designed to be fast and efficient, which makes them an ideal choice for companies that require high performance and reliability.
SOAP API
SOAP (Simple Object Access Protocol) is an XML-based messaging protocol designed to exchange structured data between different applications. SOAP APIs are well-suited for enterprise-level applications that require high security, reliability, and transactional integrity. They provide a standardized message format that can be used with a variety of platforms and programming languages, such as Python and Ruby.
Additionally, SOAP provides built-in support for authentication, authorization, and encryption, making it a popular choice for applications that handle sensitive data and require high data protection. Here are some of the benefits of using SOAP APIs:
- Strong security: SOAP APIs are highly secure and provide advanced authentication and encryption mechanisms to protect sensitive data.
- Reliable: SOAP APIs are designed to be reliable and provide a high level of fault tolerance. If an error occurs, SOAP APIs can automatically retry the request until it is successful.
- Structured data: SOAP APIs use XML to organize data, making it easy to create complex data structures and maintain data integrity.
- Interoperability: SOAP APIs can be used across different platforms and programming languages, making them an ideal choice for companies that use a wide range of technologies.
REST vs SOAP API Comparison
| REST | SOAP | |
|---|---|---|
| Stands For | Representational State Transfer | Simple Object Access Protocol |
| Resources | Uses resources as endpoints (like users or posts) | Uses operations as endpoints (like GetUsers or CreatePost) |
| Skill Level | Easy to learn and use, suitable for beginners | Requires advanced knowledge of XML and WSDL, suitable for experienced developers |
| Data Format | Supports various formats such as JSON, XML, and YAML | Primarily uses XML, but can support JSON |
| Design Focus | Emphasizes scalability, simplicity, and performance | Emphasizes extensibility, formal contracts, and standards compliance |
| Architecture | Stateless architecture, clients store and manage session state | Stateful architecture, servers store and manage session state |
| Request and Response Format | Uses HTTP methods (GET, POST, PUT, DELETE) to manipulate resources, responses include status codes and optional response bodies | Uses SOAP messages (envelopes, headers, bodies) to exchange information, responses include SOAP fault messages |
| Security | Supports various security mechanisms such as OAuth, SSL/TLS, and JWT | Supports WS-Security, SSL/TLS, and XML encryption |
| Used In | Modern web applications and mobile apps | Enterprise applications and legacy systems |
Mass Payments to Fuel the Digital Economy
Confidently send fast, secure, cost-effective mass payments anywhere in the world with the Tipalti platform and API. Attract, retain and delight your contractors, freelancers, creators, streamers, affiliates, publishers, and more with a best-in-class payment experience from onboarding to year end reporting and beyond.
What to Look For in a Payout API Solution
Best-In-Class Payment Experience
Most importantly, you want a payout API that will seamlessly integrate with the software systems you already have in place. It should provide a best-in-class user experience for your contractors, freelancers, creators, publishers, affiliates, or other types of payment recipients.
Helpful and Comprehensive Resources
Take advantage of tutorials, docs, SDKs, or sandbox environments that your API provider offers in order to ensure the smoothest payment API integration.
Up-Front Pricing Model
An up-front pricing model that works for your business is also important to consider. Make sure you’re on the same pricing page as your payout API service provider before signing on with them.
Top-Notch Customer Support
It goes without saying that API integration can get tricky and cumbersome. Having a 24/7 support team behind the scenes is critical to the successful launch of your payment API.
Payout API Considerations
In an increasingly connected world, businesses need to streamline their global payout operations to stay ahead of the competition. Payout API solutions provide a seamless and efficient way to send international payments, enabling you to foster stronger relationships with contractors, freelancers, and suppliers, through timely and accurate transactions.
With advanced automation technology, you can streamline the payee onboarding process, simplify global mass payments, offer multiple currencies and payment methods, and reduce tax compliance risks. All of this while gaining a competitive edge by offering a best-in-class payout experience.
If you’re ready to see what a payment API integration would look like between your business and Tipalti, chat with us today.
