Without the right resources, changes in technology can be intimidating. We’ve broken down the 3 most common questions that treasurers are asked about APIs.
What is an API?
What is an API? In its simplest form, an API is a technology that connects two different systems and relays information back and forth between them. API stands for Application Programming Interface…and nearly everyone uses APIs in their daily life without even realizing it:
- When you’re making a purchase with your debit card, it’s an API that allows you to see pending transactions in your bank app
- When you’re checking the weather on your phone, an API feeds in the forecast information from major weather trackers like Accuweather.
- And the Google Maps API allows ridesharing services to determine driving instructions.
Bank APIs establish a connection between your bank and other systems you work with, like your ERP. Corporates can use bank APIs to connect to a stream of data from a single bank, or to connect to multiple data streams at multiple banks. The list of available bank APIs is ever-growing, and leading banks are actively building their API offerings to gain a competitive edge and to adhere to new Open Banking regulations.
Some of the most common types of bank APIs today include:
- Payment Initiation
- Payment Status
- Account Entitlements
- Trade Finance
Does it matter if your organization connects to a single bank API or multi-bank API connection? In a word, yes! A single bank API will provide information from just one bank and one type of data — just the Transactions API at HSBC, or just the Payment API from Standard Chartered, for example. But with a multi-bank API connection, visibility is expanded to all types of bank data from all your company’s banks in one central place.
Think of it this way: airline aggregators like Kayak or Travelocity allow you to see flights from all the different airlines in one spot instead of having to visit 5 different websites. Multi-bank APIs do the same thing: all your bank data – balances, transactions, payment and so on – from all of your banks in one central place.
How do you connect to a bank API?
In the past, creating connections to bank APIs has been notoriously challenging, leaving legacy technology providers and treasury teams feeling defeated. Many in the industry will tell you ‘the banks just aren’t there yet.’
But in reality, most banks either already have APIs available, or are actively creating them — especially now with Open Banking regulations.
It is true, though, that connecting to a bank API hasn’t historically been easy. Because bank APIs are designed and created by each individual financial institution, they are built in different ways. Different data formats, different programming languages, and each containing different levels of detail. Efforts to standardize bank API protocols have gone nowhere fast because banks view their APIs as proprietary information.
So, if banks are actively offering APIs, and the benefits of those APIs are clear, how can corporates connect to them?
Some might consider building their own bank API connections. Well, each bank offers multiple unique API streams – transactions, balances, payments, payments status, and so on. The instructions on how to connect to just one of those bank APIs typically runs into the hundreds of pages, single spaced! Building your own bank API connection can take years of internal IT resources, an army of super-specialized software developers and a great deal of budget.
And that’s just if you’re connecting to just one API, much less creating links with multiple banks and multiple types of APIs per bank. Then there’s the ongoing maintenance to consider.
The easier solution is to leverage a multi-bank API connectivity provider with a robust catalog of pre-built API connections . These providers have already done the hard work that goes into translating, transforming, unifying and building the connections across all available banks, and the unique data streams within each bank. This type of provider is also responsible for maintaining these connections – not the treasury team or the IT team. With the help of multi-bank API aggregators, bank connectivity goes from complicated and time-consuming, to plug and play.
What can treasury & finance do with bank APIs?
What can you do with bank APIs? In short, bank APIs give your organization a significant competitive advantage. Bank APIs allow companies to adopt a real-time treasury approach which includes advantages like:
- Up-to-the-minute cash balances instead of prior day statements
- No more stagnant, outdated dashboards
- Same-day reconciliation becomes a reality, as does
- Instant confirmation of payments on your schedule, not the bank’s
All of which provide superior agility, more-precise data and faster decisions – so the company can decrease trapped cash, streamline work with same-day reconciliation, have total certainty when sending critical treasury payments and more.
Bank APIs are also the way your company can take advantage of emerging regulations on Open Banking. These new laws require banks to provide all bank data to account holders, and banks are addressing this demand by building APIs. This means that offering APIs is no longer a nice-to-have, they’re now a business critical need for banks. As the number of banks providing APIs grows, your company will benefit from access to the brand new data points which can only be accessed through APIs.
Superior security and the reduction of cumbersome data management tasks are also benefits of APIs. Companies using cutting-edge technology will find it easier to recruit and retain the best talent for your team, too.
…….all of which give your company an edge against the competition.