Are API’s the future of Treasury?

In fact the number grew from 58% to 61% this last year. Cash forecasting still takes second spot and cash visibility has increased in priority from 26% to 58% – this almost doubled in one year. Clients of financial institutions are increasingly looking for fast and frictionless experiences throughout the transaction life cycle – including pre-processing, processing and post-processing. Application programming interfaces (APIs) are providing valuable real-time experiences that help address these needs.

In the current environment of Treasury and Finance departments, the need to have real-time visibility of cash balances, payments and other key information is a critical business requirement. Achieving this is not possible with classic connectivity capabilities such as Host 2 Host, Bank Portal login, and Email. However, connectivity through API’s can achieve this. APIs can do this by enabling one system to connect to another, acting like messengers, looping requests to one system and responding back to the originator. In many cases, APIs are being used to transmit information to and from bank portals.

By using APIs, FI’s can offer greater speed and efficiency, and, by harnessing process automation, can provide instantaneous transactional data and actionable insights; as well as real-time visibility over payments statuses and transactional balances for efficient cash management.

APIs can help achieve business goals by connecting the digital ecosystem while bringing numerous back-end and client-facing benefits. A critical advantage of APIs is the ability to integrate real-time balances and transactional data across multiple channels, including Treasury Management Systems (TMS) and Enterprise Resource Planning (ERP).

After several years of investment in APIs to deliver integration solutions, FI’s are already seeing a strong return. Benefits include retaining clients through improved client satisfaction and resiliency, as well as unlocking legacy data and eliminating manual processing.

The API has been around in one form or another for a long time, so why is it suddenly the flavour of the month? New regulations, better technology and a competitive landscape have all advanced the cause of using APIs to create faster, more efficient customer experiences. For treasury, this means more real-time payments and faster reconciliations. Additional benefits include payment tracking, push payments and “requests-to-pay,” various risk management features (i.e., counter party verification and KYC data) and alternative payment methods (i.e., paying into a “wallet”). Next, and a bit more complex is real-time monitoring of cash flows. And thirdly and most complex of all in terms of implementation, APIs are the only way to make real-time payments and optimise working capital.

The question of cost versus need is however certainly one that treasurers must address. There are definitely hidden costs, and the biggest hidden cost is time. The basic application is often cheap, but the fact is, you will first need dedicated IT support to help translate treasury needs into the language of digital technology. And whenever you need to connect anything new to an existing system, you will often find it takes more time than you thought, and that can be expensive.

The question of cost is bound up with how many APIs an organisation is considering to implement, and for what kind of end result. Treasurers need to be clear-eyed about whether an API solution is fit for their particular purpose and also whether the API provider is trustworthy and experienced in terms of encryption standards or pre-testing of algorithms.

Technology is rarely a silver-bullet solution, and that also applies to APIs. The API is already part of the treasury connectivity solution, but does not always offer the complete solution.

As FI’s continue to invest in new technologies and further leverage the benefits of APIs, they move closer to not only achieving their strategic business goals, but also enabling their clients’ own digital transformation goals. Banks and other FI’s have the responsibility to continue to explore agile, innovative and integrated API solutions, ensuring that clients can benefit from the host of opportunities APIs will bring as they shape the future of the industry.

Digiata has vast experience and specialises in connecting internal (ERP, General Ledger, Line of Business) and external 3rd party systems (Banks, Rate providers, Wallet providers) via API’s. To know more, reach out to us.