Leveraging APIs in Commercial Banking


The shift of consumers to digital banking had already been underway for years before the pandemic hit, with many people adopting digital technologies to manage their accounts before the health crisis made it necessary. Businesses have been slower to embrace this change, and many companies relied heavily on manual processes for their business-to-business (B2B) banking when social distancing mandates quickly forced an about-face.

Since then, digitization has become a top priority for most companies, with 57% of CFOs in a recent PYMNTS study citing digital transformation, not just automation, as the main motive for their technology investments. current.

This new imperative represents both a challenge and an opportunity for investment banks. They now find themselves tasked with helping to break down the accounts payable (AP) and accounts receivable (AR) friction that their business customers find increasingly intolerable. Yet the forced change has offered new avenues of growth for transparent banking services.

Banks have decided to innovate their platforms accordingly, turning to technologies such as application program interfaces (APIs) that can make easy connections between businesses’ digital platforms and their own. For example, in another recent study, 55% of banking and payments executives cited modernizing the payment infrastructure, including API integration, as an investment priority.

However, challenges remain for banks seeking to retain business. The cost of technology and the rapid pace of digital hubs for businesses can make it difficult for financial institutions (FIs) to meet the needs of businesses.

The following Deep Dive examines how the events of the past year have led to growing frustrations for businesses with outdated or manual AP and AR solutions in their B2B payment processes. It also takes a close look at how FIs can leverage APIs and associated tools to bridge their own systems and corporate accounting platforms to streamline B2B processes and eliminate hassles.

The shift to frictionless B2B banking

Banks aiming to meet the new B2B payment needs of businesses must first recognize how those needs differ from their previous expectations. The companies are looking at for banking partners who can help them innovate their B2B operations to match both their growing digital preferences and those of their customers. Businesses are increasingly frustrated with time-consuming manual payment methods as more consumers and business partners move online, putting outdated AP and AR processes at a competitive disadvantage.

Ninety-six percent of CFOs surveyed in a recent PYMNTS to study stated that their main reason for digitizing their AP and AR processes was to benefit their customers and suppliers. The same report found that 70% of these executives improved their B2B processes to improve the overall value or loyalty of their customers.

Companies are also looking to improve sales by digitizing their B2B operations and interactions with potential buyers. Forty-one percent of B2B business leaders in a recent investigation said that e-commerce is now their most effective sales channel. PYMNTS The data also found that 83% of CFOs saw reduced operating costs and improved overall efficiency as two of the top benefits of migrating their B2B processes online.

The transition to digital B2B payments can be difficult for companies used to conducting their AP and AR processes through manual channels: in a report, 11% of companies said they had difficulty making the switch to digital treasury. Banks that act quickly to reduce the frustrations businesses face during this transformation can boost the loyalty of their business customers.

This is where APIs can offer a critical solution, as they allow enterprise FIs to provide a transparent bridge between their own platforms and the treasury management or enterprise resource planning (ERP) systems. ) enterprises.

Building the next generation commercial banking bridge

APIs are well positioned to become the backbone of the next generation digital corporate banking world. Banks are already turning to these technologies to strengthen their relationships with their professional clients. Eighty percent of financial entities in a investigation said they are already leveraging APIs to enable their corporate clients to access their accounts, perform currency exchanges, and make domestic and cross-border payments from their own ERP systems.

Research also shows that FIs are well aware of the main benefits APIs can bring, particularly as companies’ expectations of their relationships with banks change. A third of European FIs, FinTechs and payment service providers in a recent to study did not know if their current infrastructure was ready to meet future banking needs, for example.

This growing demand for cutting-edge digital solutions is also making the playground for corporate banking more competitive than ever. Almost half of another’s financial entities to study plan to build API-based financial ecosystems and move to platform-based business models, stressing the need to innovate quickly.

FIs need to take a critical look at their current B2B banking solutions – APIs could be their best platform innovation strategy for building business loyalty.


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