August 19, 2024
As digital transformation continues to sweep across finance, treasurers are increasingly looking to innovative technologies, such as application programming interfaces (APIs), to enhance efficiencies.
APIs are interfaces that allow unrelated systems to communicate with each other, sending and receiving information in real time. Within finance, APIs can be coded within backend systems, databases and applications to allow an organization’s Treasury Management System (TMS) and Enterprise Resource Planning (ERP) to maintain real-time connectivity with banks.
“Putting APIs to work in your finance technical array builds connections and new ways of doing things that begin to merge treasury and technology,” says Andy Hurt, product leader in Global Treasury Management at U.S. Bank. “We see senior finance and technology leaders aligning more closely than ever, and digital channels like APIs are steadily, and truly, transforming treasury management and corporate finance.”
Here, we’ll discuss the growing role for APIs in modern treasury strategy, the limitless potential for APIs in the future, and how finance leaders can leverage APIs in treasury management.
As finance teams today face a spate of challenges — dynamic macroeconomic environments, inflation, and uncertainty around interest rates, to name a few — APIs can empower finance teams with the apps, tools and connectivity they need to not only improve the day-to-day, but also position them to do so strategically. APIs can deliver unparalleled visibility and control over all treasury functions, including bank connectivity, payments, cash reporting, and forecasting.
Depending on the process and strategy, APIs may also enable real-time performance of tasks, which allows finance teams to bypass the delay in data updates associated with batch and file-based processing. “We’ve seen clients using APIs to access account information and balances once per second, around the clock, to power their reporting dashboards,” Hurt explains. “It takes a bit of work to get there, but if your CFO is on a business trip halfway around the world, and they want to see the organization’s cash position in the middle of the night, APIs can make that happen.”
APIs also allow finance leaders to act on those insights and move money faster than ever. They can power instant payments, issue checks, originate ACH debits or credits, even send digital disbursements to their customers via Zelle®. “Payments are a great example of APIs in action, and can really shine when it comes to high-volume, high-frequency money movement,” says Hurt. “If a business needs to move a few million payments or more each day, it’s likely their solution is going to be powered by APIs”
Crucially, APIs also allow finance leaders to move money using tokenized personal and banking information to protect businesses and customers by eliminating exposure. “You can pass information using APIs to mitigate risk and protect client data in ways that you simply couldn’t before,” Hurt explains.
When it comes to how to leverage APIs, the sky’s the limit, says Hurt. “The beauty of APIs is that they’re a good, solid and secure foundation for technical process configuration. This really appeals to developers, and the new features they bring can lend a highly ‘customized’ feel for treasury and finance applications.”
On the most basic level, APIs free users from the boundaries of file formats, allowing finance teams to unlock legacy data in their preferred format. By building APIs into an organization’s back-end systems, developers can integrate legacy data into custom dashboards to control key treasury functions. And, because APIs are so rich and responsive, tech teams can combine the data received from multiple APIs — along with other technologies, such as machine learning — and compare the new “composite” information with legacy data to realize predictive analytics.
“We’ve seen clients come up with really creative use cases that have, in a cool way, been ahead of even our own product development, which is great for bankers to learn from,” Hurt says. “APIs can bring a common language to life and strengthen the bond between treasury and tech. They’re transforming together from operational expenses to bottom line contributions. That’s a business case in itself.”
Hurt shares three steps to get started.
1. Bring IT in early
Leveraging APIs effectively requires close collaboration between treasury and tech, so bring both teams to the table early to discuss the next best steps, recommends Hurt. “The API world is different from upgrading your ERP, for example. You need input from both finance and technology to make it work.”
Bringing both teams together allows treasurers to share their pain points and the functionality they’re looking for — so tech teams can assess the level of customization needed and devise strategies to make it happen.
The right API provider should be able to facilitate these conversations and bridge the gap between treasury and tech expertise. “We’re here to help bring your stakeholders together and have a holistic conversation, without overwhelming finance teams with detailed tech information, or vice versa,” Hurt says.
2. Map out a manageable path forward
Leveraging APIs isn’t an all-or-nothing strategy. Because APIs are so flexible, you can start deploying APIs to support one or two treasury functions in a way that significantly benefits the organization — and, when you’re ready, build on your strategy from there.
A holistic conversation between tech, treasury and the bank should help identify your most pressing pain points — the ideal starting points for transformation — and how APIs can address them. “It’s not technology we’re solving for, it’s business problems, so your pain points should be the compass that guides the path forward,” says Hurt.
The discussion should also create a strategy for the rollout. “Between all the necessary and important boxes to check, like due diligence, underwriting, compliance activities, approvals, and more, it’s the onboarding paperwork that sometimes takes longer than the technical integration,” advises Hurt. “Success is always a matter of craftmanship over speed, but that makes communication and stakeholder alignment critical, from finance to IT and every stop in between.
3. Choose a partner you can trust
As more and more developers bring treasury APIs to market, it’s important to find a provider who understands the stakes involved and can help you center security and compliance at each step of your journey.
“There’s a reason that finance is usually the last department to undergo digital transformation,” says Hurt. “Ignore the buzzwords and the hype. When you’re moving tons of money, it’s more important than ever to find a technology provider – and a trusted banking partner – who won’t ever compromise security, reliability or scalability. APIs and new technology can do amazing things, but we’re bankers first, and we take that very seriously.”
Contact a Treasury Management Consultant to learn more about how APIs can make your treasury operation more efficient so you can save time and provide a greater strategic value to your organization.
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