Many of us have experienced the immediate gratification of receiving a real time payment whenever a friend sends us money through services like Venmo, or selected seats for a concert through Ticketmaster, Stubhub or an online website or app. In addition, ubiquitous tools like Google Maps allows us to easily find destinations with a click of the mouse on millions of websites. What do each of these things have in common? They function seamlessly with multiple, large, online databases all at once. This makes our click of the mouse to access virtually unlimited amounts of information easy.

The engine behind most of that seamlessness, is the power of the API. APIs (Application Programing Interfaces) are a set of technology guidelines and tools that enable software developers to build connections between two or more systems. APIs are powerful, because they add speed and convenience to many of the things that we do every day.

APIs for Payments and Data Transmission

Two of the fastest growing API categories are payments and financial. The reason why payment and financial APIs are growing so fast is simple; every organization makes and receives payments, and every organization needs financial information. Over the last few years, Treasury API’s have emerged to help organizations move from daily or weekly batch processing towards a world of real-time processing; a welcome gift to controllers and CFOs trying to gain more control over payment transactions.

The growth of Treasury APIs has been largely driven by the enactment of new rules issued by the European Payments Council called the Revised Payments Services Directive (PSD2). PSD2’s goal is to improve competition in banking and payments in the European Union. Since going into force in 2007, the PSD2 has shown significant progress in meeting its long-term goal to improve competition and protect consumers and isnow being adopted throughout the globe.

“A common complaint for treasury teams has been that they want real-time visibility of banking activity within their cash and treasury management platforms,” stated Bob Stark, vice president of strategy for Kyriba. “APIs offer the opportunity to make intraday reporting into real-time reporting.”

The Need For Speed

Historically, most banks using Bank Administration Institute(BAI) or MT (SWIFT) reporting have not been quick enough for Finance departments to access transactions in real-time. Many times, Finance resources had to log into various separate bank portals to see certain those transactions, if at all.

API connectivity offers the level of speed, and security, needed to see transactions in real-time. Many institutes are introducing new APIs to connect with their customers including Citi, HSBC and Wells Fargo who have all recently introduced new forms of API connectivity for their commercial customers over the last few years.

“That’s where it becomes more interesting for treasury—not just for bank reporting, but also for instant visibility into payment confirmations and eBAM processes,” Stark said.

The proliferation of payment and Treasury APIs have implications outside of the Treasury function. In fact, APIs have made way for new business models in general. For example, Citi Bank has seen a shift from purely business to business flows, to business to consumer (B2C) and consumer to business (C2B) flows, suggesting that the way companies are conducting business is changing.

Tapodyuti Bose, global head of Digital Channels & Data for Citi Treasury and Trade Solutions was quoted by as saying “Traditional intermediaries — whether on the supply chain side or distribution sides of business interactions — are being disintermediated. Now if you are selling goods digitally, if you’re collecting payment digitally and you’re doing so directly with the end consumer, the experience often impacts [companies’] ability to sell and have that piece of business come to you,” Bose said.

As organization are looking at the next iteration of their Treasury and Cash Management functions, they should know that APIs are not just about transaction visibility and faster payments but can also power strategic change in a way that helps a businesses reach more of its customers directly, with a good customer experience, and do it in real time.

Don’t Go It Alone

Bank connectivity is no small task and companies with many banking relationships may find it easier and more cost effective to implement a Treasury Management System (TMS). Either connecting with your Bank’s APIs or implementing a TMS will require executive buy-in, a careful assessment of a Company’s current banking relationships and bank account structure, review of its current and future Treasury and Cash Management needs, payments process, operating cashflow cycle and security needs.

The ability for an existing resource to take this on in addition to their regular duties is a recipe for failure. Using an external partner to work in conjunction with an internal designate produces the optimal mix of internal knowledge and external resources to produce tangible results.

If your organization is seeking to capture the value that bank APIs may bring to your organization, contact MorganFranklin today to take the first step in your API journey.

By Walter Ward

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