Debunking 5 Misconceptions about Real-Time Bank Data

Sarah Pease | April 22, 2022

In a recent webinar hosted by Corporate Treasurer, industry leaders from Standard Chartered Bank, global fashion and textiles supplier Epic Group, and FinLync discussed the quantitative and qualitative benefits of real-time bank data and directly addressed 5 common misconceptions about bank API connectivity.

Misconception #1: Bank APIs will soon be standardized

Some in the treasury profession are waiting to advance to bank API connectivity until the banks work together to standardize API feeds – but they might be left waiting forever.

Byron Gardiner, Head of Digital Client Solutions, Asia for Standard Chartered Bank provided a current-state assessment about where financial institutions stand when it comes to bank APIs. “On the one hand, you’ve got banks like ourselves at Standard Chartered that are out there publishing and creating premium banking APIs for our clients to consume. But, there’s a real lack of standardization and consistency with those APIs across banks. Sometimes even within banks.”

Why won’t banks be standardizing APIs anytime soon? Banks view their APIs as proprietary information – how they construct their APIs, the level of detail in each type of API, their testing environments and even the types of APIs available – transactions, balances, payment initiation, payment status, etc. – are all considered competitive information. As such, banks are not motivated to collaborate and standardize across all banks because they do not want to share that information with competitors.

Read now: The Essential Guide to Real-Time Treasury

But, companies can still advance to real-time bank data without waiting on the banks, they’re turning to bank API aggregators. The role of a bank API aggregator is to standardize and harmonize all the unique feeds of bank data across multiple banks into a single endpoint, making it plug-and-play.

Misconception #2: A plug for every socket

Once a treasury team has made the decision to advance to multi-bank API connectivity, they need to decide where to plug this new data feed into. Gardiner explains, “The workstations, the platforms, the systems that our clients are using today, oftentimes are not natively able to consume and deal with APIs.”

Corporates have a few options: first, they can seek out a bank API-ready treasury tools. Because many treasury workstations have not yet advanced to bank API connectivity, it will be crucial to ask the right questions to ensure the tool is truly able to deliver multi-bank data in real-time.

Another option is to connect a bank API aggregator to your corporate data lake or warehouse. Once connected, your real-time bank data will be piped into this data repository and be made available to your company’s reporting or BI tools such as Tableau. As enterprise systems catch up to the more-advanced consumer market, the landscape of API-ready tools for treasury will continue to expand.

Misconception #3: Real-time is just for payments

One of the corporate treasury buzzwords of late has been real-time payments. Peter Klein, CTO of FinLync comments, “Yes, of course you can initiate real-time payments, instant payments and leverage global payment networks and trigger outgoing real-time payments via bank APIs.” But the benefits of real-time bank data don’t stop at payments.

Reconciliation is another area that can see dramatic improvements thanks to bank API connectivity “If we’ve got consumers or businesses depositing collections into our accounts in real time, and getting visibility on those real-time collections during the day, now we’re seeing real value,” says Klein. He cites several ways that companies can leverage bank APIs to solve problems and improve processes including viewing transaction data in real-time means you can clear invoices instantly, release credit limits faster which permits more sales orders to be taken and goods can be shipped more quickly.

Read now: The Essential Guide to Real-Time Treasury

Sanjaya Jayasuriya, Senior Program Manager at global fashion and textile producer, Epic Group, is actively using bank API connectivity today and shared that their transactions are being reconciled in real-time which “frees up the time of the team to focus on something else that adds more value.”

Bank APIs also permit treasury teams to refresh bank balances and transactions on-demand, so you know exactly when a big wire deposit hits your account and can invest that money same-day, or avoid unnecessary borrowing.

Another benefit of bank data delivered via APIs is that it unlocks new types of data that cannot be accessed in file-based connectivity – these new data points can only be accessed via bank API connections.

Misconception #4: Advancing to bank APIs is all-or-nothing

Advancing to bank API connectivity is not binary – it doesn’t need to be a rip & replace. Treasury teams typically start by integrating their “lead dog” bank APIs first so they can see the benefits for the vast majority of their banking relationships. Indeed, the largest financial institutions are the ones that have the most bank APIs available today. Companies are shifting their connectivity footprint to bank APIs one bank at a time, on their own schedule. In the short and near term they’ll have a mix of bank APIs and legacy connectivity like SWIFT or host-to-host, but eventually they will transition fully to real-time bank data via APIs for all their banks.

Misconception #5: Faster payments means increased risk

“One of the areas that we hear a lot of interest from clients, particularly those that are moving towards adopting real-time payments, is the ability to pre-validate a beneficiary account number in real time. You think about the risk that’s attached to an instant payment. Being able to ping, via API call, to validate that account number on the other side before you initiate that payment becomes incredibly important from a risk mitigation point of view,” explains Gardiner.

Conclusion

Having successfully advanced to bank API connectivity, Jayasuriya offers this advice, “The most important thing for corporate treasury is to understand where you are today and where you want to go.”

For companies curious about getting started with bank APIs, Gardiner provides guidance on how to begin, “The most important priorities around real-time treasury are likely to focus on three areas,” he cites the enablement of real-time cash visibility and accessibility as a first goal, accessing real-time transaction data as a second milestone and tracking payment status in real-time as a third milestone to aim for.

Regardless of where your journey to real-time bank data begins, or the goals your organization is looking to achieve, it’s clear that the advantages of bank API connectivity will quickly rendering legacy connectivity channels like SWIFT and host-to-host obsolete.

FinLync Essential Guide to Real-Time Treasury