We rarely give APIs, the hidden technology that allows multiple applications to interact, exchange and obtain data, a second thought. Yet they are crucial tools enabling a cost effective and frictionless business experience that allows treasury to connect across the business and with banking partners, explains Nadya Hijazi, Global Head of Business Banking Digital at HSBC.

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The pandemic has increased the need for companies to understand their cash flow and reduce costs. It makes APIs, and the automated, real-time reporting they facilitate whereby companies can better access their banking services, more important than ever. For example, APIs allow a company applying for a loan to have funds in the account seconds after approval. “This is a real case in the current environment when there is so much lending,” explains Nadya Hijazi, Global Head of Business Banking Digital at HSBC. In other examples, she cites how APIs allow investors to fund and top up their brokerage trading accounts instantly or provide online customers with instant refunds. “Everyone is selling online. APIs allow an immediate refund to customer,” she says.

In coming years digitisation and the role of APIs has become even more important. “I see a sea change in the coming years in how API connection helps banking services develop,” Hijazi says, detailing how APIs provide treasury with access to banking services and data on demand, swapping the business-as-usual model with accelerated digitisation as well as hastening internal processes. Here treasury can integrate APIs into their own systems to unlock data and information to create valuable business insights, she explains. “APIs allow a business to move away from end of day processing to real-time decision making and reduce manual touch points.”

Of course, APIs are nothing new. At HSBC they have been used for several years to connect multiple internal systems in its digital transformation programme. However, in recent years they have evolved from being used internally at the bank to allow clients to connect their infrastructure to the banks and vice versa as corporate and bank share ecosystems to “deliver enhanced digital systems for partners and customers,” she says.

Since 2018 she notes a significant increase in customers’ awareness of APIs and their benefits. Last year the number of RFIs and RPs HSBC received with questions related to APIs and their usage, led by tech-based companies, jumped. “We started seeing a long line of customers saying they wanted to move from normal host to host, to an API connectivity,” she recalls. This year that trend has accelerated, driven by the challenge of COVID-19. “We saw the acceleration in digital demand hit Asia first and then it accelerated across the world with COVID-19,” she says.

However, there are challenges to rolling out APIs. For some corporates, like those offering a real-time service to customers off their own digital platforms, APIs are already integral to their business model. For others, integration is complicated. “Some businesses have no prior experience and depend on third parties to adapt their offering via ERP systems that aren’t ready to receive APIs,” she says. “A key challenge is the ability to integrate into their own system.” Here she explains that host to host connectivity tends to be file-based whereas APIs work in real time. It requires a fast turnaround and a new way of working to manage volumes coming in from APIs with an impact on backend systems particularly. “ERP and TMS systems must adapt and as part of this, customers must get used to fraud and security issues and move from a slower paced to a faster paced environment.”

Other challenges include the lack of standardisation. “The industry needs to do more work here,” she says. Although the hope was that open banking would create standards “it never came back with a standardisation process,” and customers still face different standards for different banks, she says although some progress has been made in Asia around common APIs for direct debit transactions, where HSBC worked with SWIFT to define the standards. “A real time direct debit is the nirvana for many companies,” she says. At HSBC, strategy remains “listening and learning” as the bank continues to deliver the best possible API strategy and experience for its customers, she concludes.

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