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It’s almost certain that the name Henry Maudslay means nothing to you. He doesn’t have a company named after him like Henry Ford or Harvey Firestone. He doesn’t have a scientific unit of measurement either, like James Watt or Sir Isaac Newton. And yet, if you could magically erase Maudslay and his influence from history, the whole world would fall apart instantly and be rendered almost unfixable. Imagine if every screw, bolt and nut disappeared?
Henry Maudslay invented the metal lathe – a tool that allowed machinists to create consistent threads in screws, bolts, nuts and fastening hardware. This consistent manufacturing process paved the way for standards that ensure that fastening hardware produced in a factory in Asia is compatible with an engine being built in Dearborn, Mich.
Few people think about how standards affect our world, but if you’ve been following the development of the FedNow Service and ISO 20022, you have some idea about what standards mean for financial services and payments. It’s important to understand how payment standards and APIs can unlock growth for credit unions and their members, much like Henry Maudslay’s inventions allowed the Industrial Revolution to flourish.
The Work of Moving Money
Without diving deeply into the Industrial Revolution, international standards or software development, it’s possible to understand how these types of innovations affect payment networks and financial institutions. While we are not so much shaping metal and shoveling coal to power national economies, we are moving bits of data across high-speed networks, sometimes globally. A credit union rarely moves physical cash from one vault to another when a member deposits a check. The transaction gets logged to a digital ledger at one location and checked against a digital ledger at another.
As financial technology has grown more sophisticated, money can move in many ways. For the most part, consumers care primarily about how fast it moves and how much it costs. They have almost no idea about the complex infrastructure that allows that money to move at all. That’s where APIs come in.
APIs Make Everyone’s Life Easier
An application programming interface (API) is akin to the standards that govern the manufacturing of railroad tracks or water pipes. It facilitates easy connections and allows information to pass from one system to another easily.
The API doesn’t precisely control what data gets moved, it mainly guides how it gets moved.
Every time you hear a vendor talk about their API, they’re saying, “We have a clear standard for how our software moves data, and it’s designed so that other software platforms can interpret the standard and interact with our data and your data.” That’s a huge benefit because connecting to a new vendor or service won’t require a custom software integration. Modern APIs are written to be easy to use and highly secure, facilitating easy connections across platforms.
If APIs are like railroad tracks, then ISO 20022 is like the standard for railway cars. ISO 20022 provides a single scheme for financial messaging, securities, trade services, cards, foreign exchange and instant payments via the FedNow Service or Real-Time Payments (RTP) Network.
Any credit union that has read the ISO 20022 standard and uses APIs that can handle compliant data will have a huge advantage in the rollout of instant payments functionality.
Why Do APIs Matter for Instant Payments?
It almost goes without saying, but the big draw for instant payments is speed. But it’s not just speed. It’s speed at scale.
APIs that are built to handle ISO 20022 data packets will enable institutions to move millions of transactions at high speed.
You don’t have to build an API to exploit this capability. Many fintech partners have already done the heavy lifting for you. Instead of trying to develop your own payment rails, you can connect to existing rails that have proven their utility and reliability.
Henry Maudslay helped create a fundamental shift in how people thought about machine design and allowed a new generation of inventors to focus their ingenuity on bigger problems. That’s what APIs and the ISO 20022 standard can do for your credit union. With APIs, the tools are closer to your fingertips than ever before. The only question is: What innovation will you build out and who will help you build it for long term success?
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