The API Effect: Creating a Real-Time Reality for Finance Teams

21.10.2024 23:40

PYMNTS.com

Nothing slows down the free flow of commerce and payments more so than manual intervention.

And with the news Sunday (Oct. 20) that Bank of America now allows companies to lock in foreign exchange (FX) rates for up to one year, simplifying treasury management processes through digital automation is top of mind for finance and treasury leaders.

With more companies working to replace manual payment processes with automated and secure electronic solutions, today’s finance landscape is benefitting from a compounding network effect where the capability to optimize working capital, manage liquidity efficiently, and ensure real-time visibility over cash flows has never been greater.

As digital transformation accelerates, one of the most powerful tools reshaping treasury operations is the adoption of application programming interfaces (APIs). APIs have become indispensable in the corporate finance ecosystem, allowing seamless integration and communication between various financial systems, enabling automation, and providing real-time data access. With APIs becoming more simplified and accessible and collaboration between FinTechs and financial institutions only accelerating, treasury teams are reaping the benefits, enhancing their ability to perform strategic financial management functions and adapting to an increasingly complex financial environment.

This ongoing shift is not only modernizing how businesses move money but is also redefining the role of finance and treasury within the larger enterprise organization.

How Simplified API Adoption Is Driving Innovation

One of the primary benefits of API integration for treasury teams is the ability to access real-time data from banking and financial systems. Traditionally, treasury teams relied on manual processes and periodic data imports, which often resulted in delays and data discrepancies. With APIs, however, teams can now integrate data streams from various banking partners and financial institutions directly into their treasury management systems (TMS), providing an up-to-date view of cash positions across all accounts and currencies.

“The most underappreciated part of any one of these finance organizations is the controller’s office and the back end of treasury, where they need to be able to take in reporting at the end of every day, be able to close the books in two or three days at the end of a month,” Cindy Turner, chief product officer at Worldpay, told PYMNTS.

API-driven solutions are also transforming the payment landscape for treasury teams by enhancing the efficiency and speed of payment processing. APIs allow treasurers to connect directly with payment platforms and banks, facilitating automated, real-time payment executions that align with strategic cash management goals. This capability significantly reduces the reliance on traditional file-based transfers and batch processing, which often lead to delays and inefficiencies.

Automation, Seamus Smith, EVP group president at FIS, told PYMNTS, “allows the CFO to spend more of their horsepower thinking about the future and the growth of their business.”

“Collections teams, for example, rely on timely and accurate information from sales and finance to effectively manage receivables,” Smith added, noting that solutions that can “analyze historical data, identify patterns, and help businesses make more informed decisions” are transforming finance team outcomes.

Better Treasury Management Means Better Business Growth

As API technology continues to advance, treasury teams will have more opportunities to leverage data-driven insights, optimize cash flows and manage risk in a real-time, automated environment

“The treasury function has definitely increased in importance, and has definitely been enhanced in terms of the versatility that needs to be looked into,” Ole Matthiessen, global head of cash management at Germany’s Deutsche Bank, told PYMNTS in an interview.

APIs enable treasury teams to connect and integrate with multiple banking partners and financial platforms without the complexities typically associated with traditional banking systems. The trend toward open banking and standardization in API technology has made it easier for companies to link their treasury management systems with banks, FinTech solutions and other financial services, creating a more interconnected and efficient financial ecosystem.

“With the right strategies in place, middle-market corporates can leverage working capital not just to survive, but to thrive in a competitive global market,” Lauren Hewings, head of working capital solutioning at Visa, told PYMNTS, noting that CFOs and treasurers are no longer satisfied with traditional methods of managing working capital. Instead, they are turning to digital solutions to enhance their working capital efficiency.

“The move towards digital solutions is becoming table stakes,” Hewings said. “There is a mismatch between what CFOs and treasurers are looking for and what financial institutions are offering.”

PYMNTS Intelligence finds that top performers regularly embrace such strategies as integrating their suppliers into enterprise resource planning (ERP) systems to streamline payments and optimize cash flow visibility.

“Many treasurers are thinking, ‘Well, how can I extract that last ounce of juice from my financial ecosystem?’” Ambrish Bansal, global head of Liquidity and Cash Concentration Products for the Citi Treasury and Trade Solutions business, told PYMNTS.

“I see the role of treasury becoming more central to [the enterprise’s] business strategy, to the growth strategy, to the expansion strategy — and quite frankly, to the sustainability strategy,” Bansal added. “The treasury team plays a pivotal role.”

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