Billing application programming interfaces (APIs) are an essential component of today’s businesses because they enable companies to manage customer billing information and process payments. When it comes to implementing a billing application programming interface (API), however, businesses are confronted with a crucial decision: whether to build the billing API in-house or to purchase a solution off-the-shelf from a third-party vendor.
In this piece, we will investigate the costs associated with building a billing API in-house as well as the costs involved in purchasing a solution from a third party, and we will show why purchasing an existing solution is frequently more cost-effective.
Expenses Incurred When Developing an Internal Billing API
Developing a billing API in-house calls for a significant investment not only in terms of time and money, but also in terms of resources. The following types of expenses can be accounted for when calculating the total cost of developing a billing API:
- Expenses Associated with Development The expenses associated with development of a billing API include the hiring of developers, designers, and testers, the purchase of development tools, and the payment of expenses associated with infrastructure such as servers, databases, and hosting.
- Expenses Relating to Maintenance After the billing API has been created, it will need on-going maintenance in order to guarantee that it is always up to date, reliable, and secure. This includes the elimination of bugs, the addition of new features, and the provision of support services to customers.
- Compliance Expenses: A billing API must meet the requirements of a number of different regulations, including PCI-DSS, GDPR, and CCPA. The costs of compliance include the employment of compliance experts, the performance of regular audits, and the implementation of security measures.
- Integration Costs: A billing API should be able to integrate with a variety of third-party systems including payment gateways, accounting software, and customer relationship management (CRM) tools. This will incur additional costs. The costs of integration encompass not only the creation and testing of these integrations but also their ongoing maintenance.
- When we add up all of these costs, the total cost of building an internal billing API can quickly climb to an unacceptable level. In addition, the development of a billing API necessitates a significant amount of knowledge and experience in payment processing and security, which might not be readily available within the company. As a consequence of this, developing a billing API can be a challenging endeavor, particularly for businesses of a small or medium size.
Expenses Incurred When Purchasing a Billing API From a Third Party
- On the other hand, purchasing a billing API from a third party can be a solution that is both cost-effective and suitable for companies of varying sizes. The following are some of the reasons why:
- When a company purchases a third-party billing API, they do not have to invest in hiring developers, designers, and testers; they also do not have to invest in purchasing development tools and infrastructure. This results in lower overall development costs. The business will not have to worry about paying any of the development costs because a third-party vendor will handle everything.
- Third-party billing APIs are designed to be reliable and require very little maintenance, which results in lower costs associated with their upkeep. The vendor is responsible for providing customer support as well as addressing bugs, developing new features, and updating existing ones. This enables the company to concentrate their efforts on developing their core competencies and expanding their operations.
- Compliance Expenses: Costs associated with complying with a variety of regulations, including PCI-DSS, GDPR, and CCPA, are built into the design of third-party billing APIs. The vendor is responsible for hiring compliance experts, carrying out regular audits, and putting security measures into place. This reduces the likelihood of the company incurring expensive fines and other penalties by ensuring that it is always in compliance with the regulations.
- Integration Costs: Third-party billing APIs are designed to integrate smoothly with a variety of other third-party systems including payment gateways, accounting software, and customer relationship management tools. Because the vendor is responsible for the development, testing, and ongoing maintenance of these integrations, the enterprise will incur fewer costs associated with integration.
The following advantages are available when you purchase a billing API from a third party in addition to the cost savings described above:
- Purchasing a billing API from a third party enables businesses to get up and running quickly, as they do not have to spend months developing and testing their own billing API first. This shortens the amount of time needed to bring a product to market.
- Scalability: Third-party billing APIs are designed to be scalable, which enables businesses to manage an increasing volume of transactions as their business expands. Scalability is a key feature of third-party billing APIs.
- Reliability: Third-party billing APIs are built with the intention of being reliable and providing high availability.
- reducing the potential for downtime and making certain that businesses are able to continue processing payments without being disrupted.
- Support and Expertise: Third-party billing API vendors have a wealth of experience as well as a depth of knowledge in the fields of payment processing and security. They are able to offer businesses expert guidance and support, assisting the businesses in navigating the complex regulatory requirements and ensuring that their billing processes are compliant and secure.
In spite of these advantages, some companies may still be interested in developing a billing API in-house because they believe doing so will grant them a greater degree of control and customization. However, even with complete control and the ability to tailor the API to specific needs, the costs of building one in-house far outweigh the benefits of doing so.
In addition, the vast majority of APIs provided by third-party billing services provide a high degree of flexibility and customization, which enables businesses to adapt the API to meet their unique requirements. In addition, vendors of third-party billing APIs provide businesses with extensive documentation, tutorials, and support to assist them in integrating the API and tailoring it to meet their specific needs.
Some data, please?
A report by Gartner states that the cost of developing a bespoke software application can range anywhere from $50,000 to $500,000, depending on the level of complexity of the application. The cost of maintaining and updating the software is something that businesses need to consider in addition to the cost of developing the software. This cost can range anywhere from 25 percent to 40 percent of the total cost of the initial development each year.
In addition, a study conducted by Forrester found that businesses that opt to develop their own bespoke software applications in-house frequently face the challenges of experiencing cost overruns, schedule delays, and quality issues. According to the findings of the study, in reality, 48 percent of custom software projects ended up going over their original budget, and 42 percent were delivered late.
On the other hand, depending on the volume of transactions, a third-party billing API might cost as little as a few hundred dollars per month. In addition, the majority of third-party billing API vendors provide a variety of pricing plans that are tailored to meet the requirements of businesses of varying sizes and scopes.
In addition, a report by the Aberdeen Group found that businesses that use software solutions provided by third parties enjoy a total cost of ownership reduction that is fifty percent lower than that experienced by businesses that develop software in-house. According to the findings of the report, using solutions developed by a third party reduces the amount of time needed to bring a product to market, improves its reliability, and allows for greater scalability.
In conclusion, the data lend credence to the contention that procuring the services of a third-party billing API rather than developing one in-house offers greater value for the money spent. An in-house solution not only has a higher cost associated with its initial development, but the costs associated with its ongoing maintenance and support are also significant. In-house solutions also have an increased risk of experiencing cost overruns, delays, and quality issues. On the other hand, third-party billing APIs provide a variety of pricing plans in addition to a quicker time-to-market, improved reliability, and increased scalability.