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Modulr glossary

API (Application Programming Interface)

An API (Application Programming Interface) is a set of protocols and tools that allow different software applications to communicate, even if they are owned and operated by separate organisations. In the payments industry, APIs enable seamless integration of financial services into other platforms, allowing businesses to embed payments technology to automate processes, streamline transactions, access new resources or services and enhance user experiences. Within embedded payments, APIs allow regulated and highly capable financial services businesses such as Modulr to grant access to payment services directly and without bank support, and (in specific circumstances) without that client business directly requiring their own financial accreditation or completing many extensive compliance and due diligence exercises themselves. Through an API, client businesses therefore gain access to the capabilities and licenses of third party Payment Service Providers (PSP) such as Modulr, for access to facilities and services as card issuance, account creation, payment initiation and settlement. These interfaces also off access to a wide variety of payment methods such as Faster Payments or SEPA Instant.

Applications

E-commerce:

Reduces fraud in online card payments by verifying the cardholder's identity

Banking and fintech:

Helps issuers and payment providers comply with Strong Customer Authentication (SCA) requirements.

Advantages

  • Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
  • Fraud prevention: Helps reduce chargebacks related to fraud.

Challenges

  • User Experience: Additional authentication steps can cause friction and increase checkout abandonment
  • Implementation complexity: Requires integration with card schemes and issuer systems.

Related Terms

OTP Compliance Strong Customer Authentication PSD2
Item created by Modulr, Updated on
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