Insight & Analysis

APIs: the promised land?

Published: Aug 2020

There’s no escaping the rise of APIs in the treasury space. As regulations such as the EU’s PSD2 began to roll in, banks around the world ramped up efforts to provide open banking technology for their corporate customers. But as banks and corporates alike recognise the benefits of APIs, we ask an expert whether they’re delivering the promised benefits.

Beautiful Lake Garda

For François-Dominque Doll, Executive Director, Global Treasury Advisory Services at Deloitte, APIs offer treasurers the possibility of direct integration between treasuries and banks. This, in turn, would lead to real-time treasuries, reductions in costs and better security.

Banks see APIs as a technology that can enable clients to achieve transformation – not just in treasury, but across the overall business. During the COVID-19 pandemic, this has been more integral than ever, with more companies looking to move online and therefore needing to develop a new business model.

Keeping secure

Security is, of course, a key concern for many companies when it comes to introducing new technologies, and some may see APIs as an unknown entity. As such, companies may have concerns about the use of APIs by treasury departments which deal with sensitive data. But conversely, the ‘open’ nature of APIs means that they can be easily integrated with audit and analytics systems, which in turn help to identify and manage risk exposures.

Likewise, APIs are ushering in the wide-scale adoption of real-time treasuries and payments. The ability to connect instantly with a banking system means that treasurers are able to send and receive payments immediately, as well as have real-time visibility of funds.

And where cost is concerned, Doll notes that traditional host-to-host or SWIFT systems have their own costs – often because of the lengthy manual tasks associated with using them. In contrast, APIs are key to back-office automation and so the cost comes only from the maintenance of the technology. In the current COVID-19 environment, as companies look to streamline costs, Doll points out that this is an important consideration.

A key benefit of APIs is that they offer companies the opportunity to transform their business platforms to have direct interaction with consumers. For a company to connect directly to the consumer, it needs to be able to input its inventory to an online platform, create a gateway to accept payments, have the ability to connect the logistics company and the warehouses – and finally, be able to deliver the goods to the final consumer. The way to connect all of that on a real-time basis is through APIs.

Doll notes that many already in the direct consumer market, such as ride-hailing and food delivery companies like Uber and Grab, are already working well in the API space and driving the adoption and growth of the technology with their banking partners.

Smooth sailing?

Like any new technology, there are still a few kinks to be ironed out with APIs. A key one, says Doll, is the lack of standardisation. “There’s no discussion between different banks about which formats should be used for APIs for payments, which means there’s no consensus on what the standardisation message is,” he explains.

For corporates with multiple banking partners, this could mean that implementing APIs is trickier than first thought. “Not all banks will be API-ready,” says Doll, adding that the question of readiness extends beyond banks. “Corporates should be asking themselves, ‘are our applications API-ready? Is our ERP capable of enabling the API with the banks? Is our TMS ready for this?’”, he says. Companies which are pioneering this technology may feel like something of a guinea pig – but by doing so, they will also be paving the way for other companies and reap the benefits of transformation first.

At the end of the day, APIs solve problems for treasurers. And with increasing regulations across various countries and regions pushing for open banking, they’re becoming a necessity. But, notes Doll, “It’s important for the treasurer to be vocal about APIs, and pave the way, driving the banks to adapt.” Since the banks are the ones that issue the APIs, he says it’s a necessity that they keep up with leaps in technology and listen to treasurers.

A deeper exploration of this topic is featured in the July/August edition of Treasury Today Asia.

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