What is programmability in payments?

Programmability in payments refers to the ability to automate, customize and execute financial transactions through software and code. This involves setting up triggers and conditions that govern how payments are initiated, processed and completed.

Bank-side and client-side programmability

In the context of banks and their clients, Client-side programmability refers to the ability for clients to implement specific logical instructions in the form of software code, which then interacts with the banks’ systems for banking services, such as initiating a payment. The code is typically deployed and executed within a client’s environment as their own applications, which work with the bank’s systems through communication channels such as APIs.

On the other hand, bank-side programmability refers to the ability for clients to deploy their logic in the bank’s system, with the transaction processor, in the form of programmable instructions. In this way, the programmable instructions are enacted as self-contained, executable instructions with the bank and can be used directly by the banks’ systems without further dependency on the clients’ systems.

Advantages of bank-side programmability

Bank-side programmability creates new possibilities by allowing clients to use their logic in the form of programmable instructions in a bank’s environment. Bank-side programmability could potentially provide benefits over client-side programmability on conventional systems. These benefits include:

1. Faster, more responsive transactions: By performing triggers, logic and actions within a single environment, programmability reduces both the technical lag of cross-platform communication and the business lag of batch updates or limited polling frequency.
2. Improved operational reliability and predictability: Instructions are housed and executed within a single environment, reducing dependency on clients' systems and minimizing the risk of failures.
3. Clearer and more reliable transaction audit trails: Use within a single environment ensures that data is maintained in a consistent format, enhancing traceability and auditability.
4. Expanded range of programmability: Access to previously unavailable data and event triggers allows for more sophisticated programmable instructions to be embedded directly into payments. Improved execution time and certainty enable these instructions to be processed within the payment flow, rather than afterward, without negatively impacting overall processing time.
5. Increased operational hours: Programmable instructions can be used with higher certainty and lower failure rates, which allows for payment instructions to be performed close to or even after typical bank cut-off times. This flexibility reduces the need for extensive time buffers and external inputs.
6. Support for complex use-cases and composability: Programmable instructions can interact with each other, supporting more complex financial operations. Atomic operations—those program operations that run completely independently of any other processes—ensure that linked instructions either completely succeed or fail, which is crucial for transactions like delivery-versus-payment (DvP) or payment-versus-payment (PvP). This minimizes counterparty risk and ensures consistency, reducing system complexity and the need for manual reconciliation and recovery processes.

Application of Programmability to Commercial Banking and Payments

These benefits show how programmability in banking can provide you with more efficient, reliable and sophisticated financial management tools, paving the way for enhanced operational performance and strategic control.

For a deeper understanding of programmability in payments, their transformative potential and how corporates like Siemens are leveraging Programmable Payments, read Application of Programmability to Commercial Banking and Payments.