Leveraging a bank connectivity API, such as one that translates an enterprise resource planning (ERP) software payment file into a bank-ready format, is a fast and affordable way to reduce repetitive administrative tasks, save time and reduce risk.
That statement is highly appealing to treasurers who have been hoping for an easy way to streamline business — but is it really true?
Today’s financial landscape is a mish-mash of cutting-edge digital systems and entrenched protocols — one might even call them legacy protocols at this point — like SWIFT, EBICS and host-to-host connections. Many banks have yet to fully embrace APIs, making the coexistence of modern and more traditional systems a practical necessity.
The cold, hard fact is that while APIs are changing the game for treasury, rollout and adoption have been slower than initial projections. In fact, fewer than 50% of banks (47.9%) offer open APIs to their corporate clients, according to the CGI Transaction Banking Survey 2022. And the vast majority of the APIs those banks do offer are designed specifically for cash management purposes, such as an API to streamline the collection of account statements. When it comes to streamlining payments, there’s a notable gap.
Even in five years, bank connectivity via API will still not be a given: Only 58.5% of survey respondents expect that they will be offering corporate clients access to online services via open APIs in three to five years’ time.
All that doesn’t mean you should give up on APIs. It just means that the promise of APIs for treasury may take longer to be fulfilled.
Key Considerations for API Adoption
You may only need to connect to one or two banks, and they may offer the APIs you need, at least for a portion of your treasury operations. However, it’s more likely that while some of your banks may be API-ready, others might lag behind. And regardless of whether you can connect via API, are you sure you want to? It’s important to carefully consider the pros and cons of connectivity options, to determine the approach that will work best for your organization.
Here is a short list of things to consider when embarking on your journey to API adoption:
- Security and Risk Management: APIs can reduce risk in certain areas, but also introduce new potential vulnerabilities.
- Compliance Complexity: Open banking initiatives promise enhanced connectivity, but also introduce complexities around data sharing and compliance.
- API Standardization and Interoperability: Every bank has its own systems and processes. This means that different banks might implement APIs differently, making more work for treasury.
- Third-Party Providers: Many treasurers work with third-party banking solution providers to manage connectivity. Is this a help or a hindrance — or even necessary at all where APIs are concerned?
The Value of a Third-Party Connectivity Provider for Treasury API Management
Whether you’re connecting directly to financial services via APIs, SWIFT, EBICS, host-to-host connections, or any other channel, you need to have someone you rely on to set up and manage the connections, messaging, and transactions. Many organizations lack the necessary in-house personnel, and even when they do, these technical resources often struggle to keep up with the evolving demands of maintaining expertise in bank connectivity, especially in the face of bank updates or internal system changes.
That’s one area where third-party bank connectivity providers like Fides can help tremendously. It’s not just about building and maintaining the connections to banks and other financial institutions, although those are the pipeline for value delivery (and Fides has connections with more than 13,000 banks and financial institutions, over 3,000 of which are direct connections — more than any other treasury aggregator). With Fides, your payments are validated. Messaging formats are automatically converted, so your team doesn’t have to do it manually. And payments are screened against up-to-date sanctions lists to lower your risk and help you stay in compliance. Plus, you have a trusted go-to team for all your connectivity needs.
AFP 2023 Panel Session
The more you know about today’s bank connectivity landscape and your options, the better prepared you’ll be to make the best decisions for your business, whether today or in future. Our team lives and breathes connectivity — and we want to share our knowledge with you.
At AFP 2023, Fides’ Mark O’Toole will be moderating a panel discussion with three highly experienced corporate practitioners: Catherine Cantasano, Executive Director, Treasurer at W. P. Carey; Kelly Carpenter, Senior Manager, Treasury at The AES Corporation; and Janko Hahn, Head of Treasury Operations at Autoneum. Together, in “Why APIs Alone Cannot Guarantee Improved Bank Connectivity: A Candid Discussion of Myth vs. Reality,” we will be separating fact from fiction to help treasurers gain a thorough understanding of today’s API reality.
Cathy, Kelly and Janko will share their thoughts and personal experiences with APIs, payments, cash visibility, and bank connectivity. Discussion topics will include the ongoing changes in the industry and areas where APIs are weakest and strongest, and considerations for corporate treasurers looking at adopting new API-based solutions.
We’ll also review the pros and cons of open banking, potential security and compliance risks, and discuss the options of communicating directly with financial institutions and working with third-party banking solution providers.
Whether you’re able to attend the session or not, we’d love to have a follow-up discussion if you’re interested in learning more about how Fides can help meet all of your bank connectivity needs! Contact us to schedule a conversation or demo at the time that best meets your needs.