APIs: More Than Just Bank Connectivity

By Bob Stark
Global Head of Market Strategy

A recent study by research firm IDC identified that 90% of finance leaders have already implemented or expect to incorporate APIs within their financial technology stack. With global banks continuing to open their platforms to customers and FinTech apps, it is for good reason that CFO’s expectations should be high. And while bank connectivity is a good place to start, the value of APIs goes well beyond connecting treasury platforms and ERPs to banks.

Starting, But Not Ending, With Bank Connectivity
When it comes to bank connectivity, APIs can offer real-time bank reporting and instant payments, with two-way digital conversations between ERP and bank happening in real-time. A simple example would see a balance query, a request for an instant payment, remittance of payment, confirmation of payment, and then the bank transaction and balance report – all happening within seconds. This is a vast improvement over the once or twice per day file transfers that are currently supported with traditional communication methods.

In short, bank connectivity is accelerated by APIs as well as the addition of new banking services, particularly for domestic and cross-border payments.

Opportunity to Transform Processes
To maximize the value of real-time, finance leaders must couple API adoption with the transformation of internal invoicing and payment workflows. Accelerating each of these processes means that real-time payments can become more than a cheaper substitute for wire payments. A nimbler finance structure allows proactive management of cash conversion and working capital opportunities. Finance teams can take control of their payments, creating partnerships that inject liquidity into the supply chain in return for supplier discounts or more optimized payment terms.

APIs and real-time transactions give finance leaders flexibility to take control of the payments process and create new value.

Payments Governance
With real-time payments comes the need for real-time payments governance. To take advantage of instant payment processing, compliance, validation, and fraud detection must also act in real-time otherwise the value offered by bank connectivity APIs is eliminated. Fortunately, APIs offer more than just bank connectivity; APIs also connect internal systems and integrate external apps and data sources to make data checks and additional features operate in real-time.

A fraud detection workflow may include the following requirements:

  1. Duplicate payment check
  2. BIC validation – including beneficiary country
  3. Bank account owner validation
  4. Sanctions list screening
  5. Payment policy compliance
  6. Payment pattern check – delivered via artificial intelligence

APIs create a composition of systems that unify data and process so that the payment goes through the gauntlet of checks and validations instantly before being remitted to the bank or non-bank payment channel. In this way, CFOs and their teams maximize the value of APIs and real-time payments.

Thinking Beyond Payments
While accelerating the payments journey reduces cost and creates financial benefits for CFOs, controllers, and treasurers, there is significantly more value to be unlocked by APIs than quicker bank connectivity and real-time banking services.

APIs enable open platforms, where vendors are publishing APIs that allow third parties to build secure apps that can share data and/or offer new workflow features to accelerate product development and innovation.

“New” data may include external forecasts, benchmarking information, market rates or pricing sources that couple with internal financial information to drive more complete forecasting pictures, exposure analysis, reconciliations and much more. The unification of internal and external data centralizes reporting and offers better business intelligence – especially when using data visualization tools like Qlik, Tableau and PowerBI.

New features unlocked by APIs can include trading portals, cryptocurrency or NFT wallets, and investment allocation tools, among others. Most financial system providers are building their app network and marketplaces through partnerships with the FinTech community, including hackathons with local associations or international events such as Vivatech. What APIs allow is the streamlining of workflows so that the user experience is not of using multiple software packages but instead is offering a continuous and uninterrupted process to drive visibility, efficiency and control for the office of the CFO.

With API integrations, there is simply no reason why financial systems cannot work together, talk with each other and share information – in real-time. Not only does this offer more complete and insightful reporting, but it also introduces extreme automation that frees up staff for more value-added activities (e.g. insightful reporting) as well as streamlining processes to minimize the impact of employee departures. This increased business continuity also serves to make CFOs more resilient to market volatility and inflation.

APIs Deliver Enterprise Value
CFOs and finance leaders looking to transform process, modernize technology and unlock greater business value need to be thinking about how to incorporate APIs wherever they can to unify data, compose financial systems, and streamline processes to drive greater efficiency. APIs may start with bank connectivity, but their value to the bottom line is much more than that. CFOs who are ready to embrace APIs are extending their thinking well beyond connecting banks to embrace the entire opportunity.