Treasury Management

APIs, the gateway to open banking to speed up liquidity management

May 8, 2024

The European PSD2 directive takes treasury management digital, enabling finance teams to enhance their strategic role within the organisation. Here are 6 advantages of open banking.

Open banking and the digitisation of treasury is gaining ground in the business world. A study for Europe shows that spending among financial managers increased in 2021, as 47% of respondents to the study by the open banking platform, Tink, acknowledged. Or this one, which estimates that the number of APIs could increase from 200 million today to 1.7 billion by 2030, according to a report by application vendor F5 on the challenges and opportunities in a connector-driven economy, which notes that they are an “economic driver” and a “critical success factor for business.” 

PSD2 opens the door to the modernisation of the operation of the finance teams to evolve from Excel and file transfers to automation softwares through the world’s APIs, open application programming interfaces that have become the key to open the door to dual connectivity: that of third parties with a company’s banking data and that of the cloud which, in turn, opens the way to a whole range of software solutions advancing in the cloud universe.

6 advantages of ‘open banking’

Banking APIs go far beyond payment processing, allowing you to view cash positions and bank statements in real time and to substantially improve and speed up accounting processes with third party partners. If, in addition, these are connected to the cloud, this optimisation goes to a higher level. Let’s take a look at the advantages of working with a Cloud solution:

1. Automation and real time

Automated treasury management eliminates the tedious task of logging into individual banks to download transactions. With an advanced solution, all bank accounts can be aggregated on a single screen, centralising the display of cash movements instantly and providing greater security and reliability. At the same time, it performs banking reconciliation, provides automated and self-categorised reporting, payments and collections security and provides very useful functionalities such as bank pooling, cash pooling or currency exchange.

2. Less time and resource-consuming integrations

The proliferation of APIs has enabled hyperconnectivity between the entire financial technology suite of finance teams, which increasingly tend to integrate specific solutions for each need and rely on their ERP, treasury, CRM, banking etc. partners. 

3. Saving time and money

Up to 75% of time can be saved by finance teams in operational treasury management tasks, time that can be spent on new value propositions with innovative solutions or greater personalisation of resources. In terms of costs, just think of the fees that can be reduced or, ideally, eliminated when carrying out these banking processes through these new solutions in the APIs world. 

4. Fraud prevention

This helps to detect potential fraud, either through the automation and data analytics, or by increasing the time available in teams for value-added tasks to the detriment of routine tasks.

5. Reduction of human error

Clearly, compiling the movements of different bank accounts by entering them one by one and entering them manually is subject to a percentage of human error. This is not only costly on an operational level, but also on a personal level.

6.  Liquidity and cash flow forecasts

Thanks to this instant control of consolidated cash and debt positions, along with cross-checking of historical data, liquidity and cash flow forecasting scenarios can be planned. This is highly valued by CFOs, as forecasting requires more than a week of data collection

As can be seen, this new working model presents advantages far superior to the traditional rule 43 methodology. In particular, the one referring to lag.  As noted above, through cloud solutions, the information provided is in real time. Likewise, viewing the state of positions is more dynamic and versatile. 

Undoubtedly, after the pandemic, treasury management technological solutions have improved their functionalities in response to the challenges that COVID-19 has revealed in the liquidity of the business network, making finance teams gain a greater role in the control of cash flow. To do this, it is necessary to move to the next level with technological solutions that take treasury management to Industry 4.0 and with which to improve decision-making and help the business to gain in competitiveness, efficiency and profitability.

CTO @ Embat
Tomás, with a background in telecommunications engineering, began his career in bank connectivity when he took on the role of CTO at Fintonic Latam, before joining Embat.

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