In a recent webinar hosted by Treasury & Risk, panelists from Walmart, Accenture, Bank of America and FinLync discussed a hot topic in today’s world of corporate finance: real-time data. The discussion brought some key revelations to the forefont.
Key Revelation #1: Real-time data is not new to treasury
Matt Allen, Assistant Treasurer at Walmart, declared, “Real-time data is not necessarily new [to corporate treasury]. We’re just looking to use it for different channels with our banking partners. I think back to credit card and debit card authorizations in real-time, we’ve been leveraging that data for some time. Why would we not want to bring that over into other areas of our business where we now have updated tools and processes that can consume it much more quickly than we could in the past.”
“Think about payment authorizations, certain compliance data around financial services. We’ve got real-time activities in place there. We have cash recyclers in our stores that act like ATMs and interact with our banks and in order to achieve a bank owned cash model, like in other ATMs, we provide real-time visibility to flows in and out,” says Allen.
The takeaway? Allen is correct. Real-time data isn’t a new concept for treasury, but the ability to get bank data in real-time is definitely new to the industry.
Key Revelation #2: Real-time bank data is actively being used today by corporations
Real-time bank data has been a treasury pipe dream for ages. The term has even been misused so frequently that some treasury teams mistakenly label their bank data flow as real-time, even though they still rely on bank files to send their data at pre-scheduled intervals.
The true definition of real-time bank data is “You’re driving an on-demand experience. You’re not waiting for the bank to tell you how much is in your account. I’m opening an app and it’s requesting and giving me that real-time available balance. There is no file, there’s no bank statement, it’s being generated and pushed through interfaces. You are requesting this is as simple as pressing a refresh button. And that is the experience delivered with a bank API connection. It’s you now as a treasurer in control of your data, opening an app inside your workspace and hitting a refresh button. Polling and bringing in now the balances that you want, balances for certain companies, for certain accounts, for certain banks. Requesting the data you want, when you want it – and not being reliant anymore on a bank waiting to do a batch job and generate this batch bank statement or payment status file,” states Peter Klein, CTO and Co-Founder of FinLync.
But connecting to bank APIs has historically been a challenge for several reasons. First, the sheer complexity of the integration is daunting. The instructions for connecting to a single bank API is a single-spaced document running into the hundreds or thousands of pages – enough to make even an experienced team of developers cringe. At best, you would spend months or years of IT resources establishing 1 connection, much less the multiple connections across each type of bank API and across all necessary banks.
Other historical challenges include adapting the bank APIs to meet your company’s unique security standards, and figuring out how to plug bank APIs into your existing internal systems.
The good news is that these hurdles to real-time bank data have been erased by bank API aggregators. A bank API aggregator has pre-integrated connections to bank APIs – they’ve already done all the hard work for you. They also make it easy to comply with your internal security requirements, and offer a standardized “plug” to connect into your existing systems.
The takeaway? Real-time bank data has arrived. If you’re using file-based bank connectivity including SWIFT, your bank data is by definition, not real-time.
Key Revelation #3: There’s a clear ROI on real-time bank data
But according to Allen, “Some of what I see my team doing today are things that I had done when I started in treasury back in 1998. I mean, think about eliminating bank portals and tokens and someone that’s always having to deal with bank files that are either late or missing, or even in our current SAP treasury environment, these are still challenges that we’re dealing with today. But the business case looks really good.”
Allen continues, “It’s just a simple ROI for us. We think about the value of being able to gain that information earlier, maybe with less friction and utilize it. And what we’re seeing is it pays off…We don’t see this being a big increased cost. We see this as part of our transformation to leveraging more tools, to leveraging AI, to just being a smarter, more digitally enabled treasury.”
The takeaway? The ROI on real-time bank data is easily proven.
Key Revelation #4: Real-time is more than just real-time payments
A common misconception about real-time in treasury is that it’s all about real-time payments. Untrue, says Klein.
Cash Visibility and Reconciliation: Klein states “Being able to get visibility on your clients paying you in real-time, this has huge value. And then you have the knock-on effects around reconciliation. If you are able to get visibility on your clients, your customers paying and depositing funds, collections, in real-time into the account, not only can you leverage that cash as part of the business and fund the business as needed, but you’re able to then start clearing down your collections, your receivables in real-time.
“So if you are able to reconcile and clear customer invoices, customer open items, instantly, you are now freeing up those credit limits that could be blocked, and now customers can start ordering more products, goods can be shipped out sooner, and increase sales order.”
Fraud Prevention: On the topic of fraud prevention, Allen states, “We think about the data and the insights that Luis had mentioned as being really important for not only analysis to drive improvements in our operation, but early warning detection. I think back, even to when I started here, a lot of bank recons were done 15 days after the month end close. And for us, and many companies, the dollar value is so significant, you’re finding issues, fraud, or settlement issues, et cetera, so far downstream that you could have, with early warning, you could have detected upfront and resolved the issue and maybe mitigated something. So we see a lot of value there as well.
Klein adds, “I was speaking to a client the other day, who is suffering from very slow reconciliation, especially when it comes to cards. So if you’ve got fraudulent cards that would be, in this case, were being used in some of their stores, if you can’t get visibility on what’s being reconciled from the card acquirers through APIs, from the card acquirers, as well as from your banks through APIs, and you’re not seeing that instantly, you are then not being notified…if you are notified, you can chase up and get that money back. But if you are leaving fraud for too long, you’re always going to have trouble with getting those funds back.”
Supply Chain Financing: “With bank APIs, you can now initiate supplier financing agreements direct with your bank partners. No longer having to manually enter invoices into bank portals, or into third-party systems. Rather, as soon as those invoices come in from your suppliers, being able to interface and have them directly to the banks in real-time and suppliers then being paid sooner, those confirmations coming back, and having a much more automated process,” explains Klein.
Payments: Of course real-time bank data does have benefits for payments as well. Allen shared, “Our ability to track payments without logging onto bank websites, without needing to have access to tokens, et cetera, in this world where we’re trying to be flexible and be able to work in the office and remote, and at times from other locations, that’s really important.”
“I hear this time and time again from clients,” says Klein, “that there’s a payment file that gets generated out of the ERP system and it gets dropped somewhere on a file server and then moved through various interfaces and middleware. Then you’ve got to wait for the bank to push back maybe a status file, and that status file never makes it through. I mean, when we talk about real-time, we eliminate files. We eliminate these file servers and the need for pushing data to the bank and bank having to push data back. Rather, I can now get the status of my payments in real-time. So what it means is as soon as I send that payment message, no longer a file anymore, but message stream, synchronously I’m receiving back in real-time that status. It eliminates the risk that that status isn’t going to appear.
The takeaway? Real-time bank data can advance treasury practices in cash visibility, reconciliation, fraud prevention, supply chain financing and yes, payments.
As the technology driving real-time capabilities has advanced, the quest for real-time treasury and a digital treasury operation has advanced as well, allowing companies that are using this new technology, like Walmart, to focus on delivering solutions that go beyond the technology itself to how they can use real-time bank data to address critical business needs, reduce friction and inspire new ways to support their business and wider supply chain more effectively.