APIs Help FIs Keep Pace With B2B Clients’ Faster Payment Needs

APIs are changing how banks serve their corporate customers, helping them become more competitive. Europe’s open banking regulations have forced financial institutions (FIs) to use APIs to open their data to FinTechs, which has resulted in many new services for businesses. Strong market demand is even compelling banks to adopt such practices in regions where open banking is not legally required.

The technology grants ample benefits to all parties involved. Banks offer third-party providers APIs that can be used to develop services for mutual clients, for example, enabling FIs to offer wider arrays of solutions. APIs also allow business clients to more easily integrate banking and payments functionalities into their workflows, which can connect them to real-time payment rails for faster, data-rich transactions.

“The benefits of APIs for instant payments [are] huge,” said Charlotte Hausemer, vice president of innovation and product management for trade and treasury solutions at BNP Paribas. “[Faster payments rails] existed before. What we do with instant payments and APIs is offer 24/7 [access to those] services. That’s unusual for customers because, right now, [payments] process in batch mode. … [Real-time] gives eCommerce traders and [business-to-consumer] retailers instant access to their funds [for] working capital and liquidity-related benefits. As more countries implement instant payments, it offers treasurers new ways of working, moving from batch processing into a real-time environment.”

Hausemer recently told PYMNTS how APIs help banks’ business clients get ahead and make corporate treasurers’ lives easier.

Opening up to Faster Transactions

B2B demand for real-time payments has been ramping up, with companies looking to free themselves from the limitations of batched processing. APIs can extend such freedoms, linking FIs to countries’ instant payment schemes and enabling 24/7 year-round payments. Providing access to the Single Euro Payments Area’s (SEPA’s) Instant Credit Transfer (SCT Inst) rail is especially valuable because the service is not restricted to one country, Hausemer said.

Some sectors have shown particularly high demand for faster payments, she added. eCommerce retailers are clamoring to accept such transactions, supplementing traditional online payment instruments such as PayPal. Faster payments allow firms to unlock improved invoicing terms and just-in-time stock management in addition to receiving their funds quickly.

Letting Payments Data Flow

Quickly sending money is only one way that FIs can better serve business clients, though. Companies are best positioned to take advantage of payments — instant or otherwise — when additional relevant data accompanies their transactions.

Modernizing the landscape for real-time transactions requires firms to upgrade their back-end batch processing systems so they are capable of sending real-time payment details. API connectivity can support flexible messaging and transmit more comprehensive transaction data in a cost-effective manner, Hausemer said.

“All this infrastructure that’s been in place for many years works very well for payment files with high volumes of non-urgent transactions — anything in batch mode,” she noted. “In addition to that, real-time payments — en- abled by APIs — offer the immediacy and fluidity that treasurers want.”

Corporate API connectivity can complement existing connectivity solutions to offer the immediacy and fluidity that treasurers need by enabling urgent transactions, allowing access to payments tracking, account balance and transaction details in real time, she added.

Treasurers want in-the-moment data because it allows them to best understand their companies’ cash positions. BNP Paribas aims to provide this transparency with an API that connects with global messaging firm SWIFT’s SWIFT gpi, which offers end-to-end transaction tracking for payers. The system quickly informs customers of any payment delays and provides confirmations for completed transactions, boosting trust between buyers and vendors and granting treasurers better insights into their cash flows.

Ease of Access

One of the challenges faced by FIs with compelling payment data services is the need to facilitate easy access to those solutions for their corporate clients. Unfortunately, banks’ cash management, payments and other core financial services often require intensive work by IT teams to implement, Hausemer noted. She said such offerings are also thus expensive for customers to integrate.

Using API-based solutions can be a game-changer, as they offer greater flexibility, agility and scalability that can be more easily added to corporate clients’ systems, reducing programming work. Such services can also be readily incorporated into treasury workflow systems and other enterprise management software, enabling more convenient use. This allows treasurers to access banking and payment features in the systems where they typically work, preventing them from switching between separate platforms.

Banks can collaborate with FinTechs to offer business clients broader service options as well, creating API libraries that enable third parties to develop services that retrieve certain banking data. BNP Paribas had to rethink its approach to such scenarios before it could launch its API Store to comply with Europe’s open banking laws, which require FIs to offer third-party providers access to these libraries. The process creates new security challenges for banks, however, meaning they must employ robust data security strategies and vigilantly monitor potential fraud that could take advantage of emerging API-based services, including real-time payments.

APIs are critical to keeping pace with corporate clients’ demands, even as FIs wrestle with open data sharing’s difficulties. The new connectivity and data flow opportunities enabled via APIs go beyond information reporting and payments, extending easy-to-integrate overlay services and furnishing corporate customers with new tools developed through FinTech partnerships. FIs are aware that their business clients want faster transactions and richer data, and APIs may be just what banks need to assemble best-of-breed financial services tailored to their corporate customers’ needs.