APIs for Corporate Treasury: Not only efficient but also easy
There are several situations in which you may want to have real-time information:
- Before following up on an overdue payment from a customer, you may want to verify that the payment has not been made yet.
- Before delivering goods, you may want to confirm that you have received any required prepayments specified in a contract.
- If you are involved in a multi-step corporate restructuring, you may want to be notified as soon as certain cash transfers are completed.
You can always log in to your banking portal to get the required data but it is time-consuming, not efficient and also puts too much workload and time pressure on employees having access to banking portals – simply because a number of users interested in certain pieces of information is usually much more than a list of authorized account users.
It is especially a shame in the era of extensive technology solutions, in the era when your smartphone has more computing power than the whole equipment on the board of the space shuttle that once brought the man to the moon. So you may be interested in available solutions.
Options to get intraday information
In the recent past, the most widespread way to get the required information was via receiving intra-day statements. Technically it represents sending files over the secure channel in specific formats: MT942 (text file with some tagging structure), CAMT.052 (xml file), etc.
The problem is that data in that case is sent at predetermined times, so it is not pure real-time information.
An alternative and a more modern solution are using APIs.
What is API and how to use the technology?
To understand why banking APIs are easy to use we first need to understand what API is. Many people are scared by IT terminology, and this paragraph is to unveil the curtain.
API stands for Application Programming Interface. It represents a set of tools which make it possible for different programs/software’s/IT systems to communicate with each other. In our case these two IT systems are the banking portal and the corporate IT system. The latter may be your TMS, ERP, or accounting system, either purchased from a third party or developed in-house. Or it may even be your own short piece of code.
API represents a general term, it has existed since the beginning of programming and software development. So it is by no means a new feature. At the same time when people speak about APIs in the modern world they usually mean so-called RESTful APIs – a specific and easy-to-use type of API. And that is also true about banking APIs – in majority of cases they will also fall into that category.
We added another term and now it sounds even more complicated? Don’t worry, we are almost there.
RESTful APIs effectively represent the exchange of information over the same channels and in the same way as when you do your web surfing. And that is exactly what makes them nowadays both an industry standard and also easy to use – because the tools to use the technology are delivered out-of-the-box with most of the modern software and programming languages.
To confirm my words with a practical example I can refer to my own experience. As an active treasurer and a python enthusiast, I could build my own app for retrieving a real-time list of intraday transactions from a bank with less than 30 lines of code. These 30 lines of code covered end-to-end processes: from authenticating yourself at the bank portal to publishing processed requested information at the internal corporate dashboard.
What are the challenges?
Let me also list some of the challenges surrounding the use of technology:
- Most probably you have heard about PSD2 which obliged banks to provide APIs to PSP (payment service providers). At the same time, there is no legal obligation to provide the same service to corporate clients. So you can not expect all the banks to provide it. The good thing is that most of the leading banks are doing this on a voluntary basis.
- There is no industry standard for APIs, and every bank will have its own API specification, although we may expect the market to be heading toward unification.
- Some old IT systems need to be more capable to work with RESTful APIs.
Conclusion
Before summarizing I would like to mention that retrieving bank balances and lists of transactions in real-time is not the only use of bank APIs. They can also be used for making payments, initiating FX trades, etc.
That makes APIs a nice and easy solution although coming with some limitations and challenges. At the same time, I believe that the future of bank connectivity lies with API technology. What do you think?
