As API-driven platforms become increasingly common in the investment industry, will yours be one of them?
Payment API-driven platforms will play a key role in the future of investing, reshaping how investors make payments and creating new opportunities for investors and investment platforms alike.
As we have seen, the DIY movement expands beyond home renovations and breaks into online brokerage accounts. Nothing illustrates this better than the 2.3 million DIY online brokerage accounts Canadians opened in 2020, tripling from the previous year.
When everyday Canadians have a stock portfolio in their hand, accessible any time and anywhere, the effects are bound to ripple throughout the ecosystem. And so they have. The investment industry is deploying cutting-edge technology to stay on top of trends, and payment APIs top the list.
Investment platforms that upgrade their technology see positive results. They become more nimble to adapt to market changes, enhance their product to maintain competitiveness and gain access to new revenue streams.
Investment platforms are using payment APIs to streamline the payment transaction process. With payment integration, investors can make deposits and withdrawals quickly and easily without navigating multiple payment systems or entering their payment information numerous times. This ensures that investors can deposit and withdraw funds easily, which in turn allows investment platforms to receive payments and execute trades with minimal delay.
The security features of payment APIs help protect users' financial information. Using a reputable payment provider, an investment platform can build trust with its users and ensure their transactions are protected from fraud and other security threats. Mitigate and manage risk with KYC, data intelligence and encrypted tokenization.
Payment APIs can help investment platforms automate transactions, reducing manual intervention and streamlining processes. This enables them to scale more efficiently and reduce costs associated with manual processing.
Embedded payment technology can increase the convenience of a platform by offering a range of payment options. By allowing investors to choose the payment method that is most convenient for them, the platform builds customer loyalty, helping to expand their customer base and increase revenue.
Payment APIs can help investment platforms gain valuable insights into user behaviour and payment trends. By analyzing this data, the investment platform can better understand user needs and preferences and make data-driven decisions to improve the user experience and grow its business.
What was once available only to wealthy individuals and fund managers overseeing large holdings is now open and accessible almost to all; financial APIs have democratized the entire investing experience.
Payment APIs provide the foundation for flexible and more innovative investment opportunities such as fractional ownership of assets, micro-investing, or even the whiskey cask investment market.
For instance, for less than $500, investors can invest in a commercial real estate development project with the same ease and experience as any online e-commerce transaction. With a unified tech stack, including payments, investors can quickly and easily make those small and recurring investments into a diversified portfolio of stocks, bonds, or other securities to build wealth.
APIs reduce the barriers to entry and offer more flexible investment options, making investing accessible and creating new opportunities for both client acquisition and client retention.
To attract more business, investment platforms are levelling up their tech stack to stand out in the crowd.
This includes functionality such as:
Risk intelligence: tools for managing the issuance and compliance requirements of investment offerings, including investor onboarding, regulatory reporting, and investor communications.
Investor management: features to manage investor relationships, including account management, document storage, and reporting.
Investment management: tools for managing investment offerings, including deal structuring, pricing, and allocation.
Payment processing capabilities: end-to-end payment processing solutions, including new payment technology, access to multi-channel payment rails, bank account verification and real-time payments, enabling investors to fund their investments securely and efficiently
Data Insights and detailed reporting: features and tools to tap into data to improve distribution effectiveness, investment performance, and productivity in the middle and back offices.
Without a unified tech stack and embedded financial technology, things get a bit tricky when investors want to invest.
For instance, without alternative payment solutions in place, an investor might need to fill out a wire transfer form or use the traditional EFT payment solution to the investment platform, which can take several days to process. The result? At best, a delayed investment opportunity; at worst, a missed trade.
Investors want to know they can transact securely on the platform. Sensitive financial information, such as bank account information, must be handled appropriately to prevent fraud and identity theft to combat potential client distrust.
When investors encounter a slow process, hiccups in the payment transaction or process inefficiencies, it becomes a barrier and a deterrent from participating in investment offerings and may find them looking elsewhere.
• Multiple touchpoints
• Convenience and control over their financial transactions
• Faster transactions
• Enhanced Security
A positive investor experience leads to stronger relationships, increased customer loyalty, and better word of mouth.