Why the Secret Sauce Isn’t So Secret Anymore

With the rise of APIs and the race for consumer loyalty, payments players are under pressure to innovate as never before. The result? A new openness to outside developers.

If anything in the payments business can be said to approximate a com-pany’s crown jewels, it’s the code that controls, uniquely for that com-pany, how a transaction works when a consumer starts the process with a swipe, dip, tap, or click. Once closely guarded, those jewels are increasingly open to hotshot developers who work for themselves or other firms.

The speed with which such open access is spreading has taken some long-time payments executives by surprise. “It’s happening fast and furi-ously,” observes Mimi Hart, chief executive of point-of-sale equipment and software vendor MagTek Inc.

In many ways, the trend has been developing for years. Armed with software development kits offered by payments processors and networks, outside coders can use application pro-gramming interfaces to hook into an existing payment service and integrate it with a new Web site or mobile app the developer is working on. PayPal, for instance, was offering this kind of platform as early as 2009. But now, open APIs and open developer portals are spreading at breakneck speed.