When it comes to corporate banking, there are a few different API types that you’re likely to come across. Understanding the different corporate bank API types is important for treasurers who want to make the most of this technological advancement. In this blog post, we’ll take a look at the four most common API types in 2023 and discuss what each one entails. Stay tuned for an in-depth look at each type of API. And, if you’re not caught up on the basics of bank APIs, consider taking our free tutorial or reading about corporate bank API basics first.
Balances Bank API: Definition and Basics
The balances bank API is one of the most highly adopted types of corporate bank APIs on the market today, likely tied with the transactions bank API, which we’ll discuss next. A corporate bank balances API delivers up-to-the-second amounts of ledger and available balances in any given account.
Depending on whether your bank offers an open banking API or a premium corporate bank API, the information that a balances API contains can differ from bank to bank. Treasurers should proceed with caution when it comes to the lack of standardization among corporate bank APIs, but thanks to multi-bank API aggregators, there is a solution. Most corporate balances bank APIs will include the date and time of the balance, ledger and available balance amounts, account number, and account currency.
A balances bank API can be used for countless different treasury and finance functions – from the Treasurer, to the Controller, Accounting Clerks, to Audit, and even the CFO. It’s used for daily tasks like creating the cash position and monitoring complete cash visibility, checking balances before approving or sending a payment, or tracking balances over time. It also provides precise information to support key decision-making actions, like investment decisions, loans, and inter-company funding.
Tip: Two key elements for corporate bank balance APIs are having virtual account balances for cash concentration and multi-currency account balances and ensuring that the bank API offers historical transaction information.
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Transactions Bank API: Definition and Basics
Tied with balances, the transactions bank API is another highly adopted corporate bank API in 2023. Whereas the balances API only delivers the balances themselves, the transactions bank API provides detailed, line-by-line data on specific transactions in any given account.
The level of detail in transaction bank APIs varies widely, and some banks most certainly have more robust transaction APIs than others. The baseline data provided by a transaction bank API is the date and time of transaction, account currency, account number, transaction amount, transaction currency, a transaction reference ID, and a description of the transaction.
A key differentiator between transaction bank APIs and transaction data provided via host to host or SWIFT is that bank APIs support all global languages and enriched data, like invoice information. A transaction bank API’s ability to provider richer data is crucial for improving reconciliation, because it is easily human and machine readable which increases rates of automatic matches and decreases the number of exceptions.
Because transactions are a vital part of corporate treasury & finance, the transactions bank API is used by nearly everyone in the office of the CFO. Transaction information via bank API is provided in real-time which speeds up reconciliation and permits more-precise cash flow forecasting, it also provides increased confidences in balances data, because the teams can see exactly which transactions have hit the bank account and which are still pending. Finally, a company that can see transactions in real-time rather than next-day or hours later will be able to identify fraudulent transactions more quickly, and in turn have a better chance at mitigating the risk.
Tip: Similar to balances, ensure that your transaction bank API offers historical transaction information.
Payment Initiation Bank API: Definition and Basics
The purpose of a payment initiation bank API is simple: to move money. Payment initiation bank APIs transfer money from one bank account to another, and in most cases, the sending and receiving accounts are located at two different banks. Payment initiation bank APIs can process batches of payments or just one payment.
Payment initiation bank APIs transport information like the amount, description and currency of the payment, and data account numbers for the payment sender and payment recipient. Because bank APIs support enriched data, the description can include remittance details, invoice number, and more. An essential part of the best payment initiation bank APIs is a unique payment reference ID.
A major benefit of using payment initiation bank APIs is that the sender has access to several methods for sending the payment – they can choose from options like real-time payment networks, ACH, or wire to get the money from A to B, optimizing lowest cost while ensuring the payment arrives at the intended time. Just-in-time funding is made possible by payment initiation bank APIs because bank APIs offer instant data exchange – no more waiting ages for a payment acknowledgement or wondering if a payment failed. We’ll talk more about payment status bank APIs in the next section.
Payment initiation bank APIs are used by anyone in finance who touches payments – either directly or indirectly – including vendor payments, AP execution, AR, loans, payment teams, all the way to the Treasurer, Controller and CFO for critical treasury payments.
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Payment Status Bank API: Definition and Basics
Whereas a payment initiation bank API moves the money, a payment status bank API lets the sender find out what the real-time status of a specific payment(s) is.
As every treasury and finance practitioner knows, there are often “layovers” between sending a payment and it successfully arriving at its destination. Payment status bank APIs provide the real-time condition of a payment — such as sent, failed or accepted. It uses a one-to-one unique identifier for each payment instruction, which permits the sender to see the exact status of a specific payment. Payment status bank APIs make total payment traceability possible because it provides real-time visibility into the condition of the payment initiation instructions within various clearing systems and any intermediary banks.
Without payment status bank APIs, treasury and finance are left wondering if their payment was successfully sent, and are constantly checking for acknowledgements.
Teams across finance – like vendor payments, AP execution, AR, GL, payroll, FX funding, investments, debt obligations, and intercompany funding – all use and benefit from payment status bank APIs.
Predictions about what bank APIs will be next
As bank API adoption continues to overtake legacy bank connectivity methods, look for the following bank APIs to increase in adoption:
Bank Account Management APIs – These transaction banking APIs are coming to the market fast. Banks are mobilizing their teams to allow the management of bank accounts to be handled via API. This would include limits on accounts, signatories, account status, approvers, and key banking contacts (Relationship Managers). With Bank Account Management APIs corporates will be able to maintain their bank accounts in real time from their ERP. Could this be the year that eBAM finally becomes a reality? Find out what banks need to do launch eBAM via bank APIs.
FX Bank APIs – These bank APIs are going to increase in both demand and adoption in 2023. Businesses interact with multiple different banks, across different geographic locations. This means that a business is contracting at different rates with different banks. The demand to pull a corporate’s favorable rate into their ERP via FX Bank APIs will enable corporates to streamline processes and eliminate the need to execute transactions in banking portals.