B2B Payments

Open Banking Adds Intelligence To Treasury Management

As the corporate treasurer takes on a more strategic role in the enterprise, treasury and cash management technologies can often be stuck in the past, failing to keep up with financial execs’ needs. The problem can be traced back to data: as organizations scale, either through organic growth or M&A, they’re taking on more financial management platforms and opening more bank accounts, leading to fragmented storage of financial data.

Despite the data challenge, pressures on CFOs and treasurers continue to mount. Analysts today expect the cash management of tomorrow to be real-time, which means financial executives need to access all of their data — fast.

Brett Turner, founder and CEO of corporate financial data management company Trovata, recently explained to PYMNTS why this is next to impossible using traditional financial management tools. Corporates that aren’t using an automated solution are often forced to manually pull data from online banking sources into Excel spreadsheets, and manually normalize that data to analyze it and discover their cash positions, he said.

“You’re doing your own IT and data normalization, and from there, you have to go to your ERP system for accounts receivable and accounts payable data, and normalize that data,” he noted, adding that there is an opportunity to automate this manual, repetitive process.

The friction associated with manually downloading data across banking and financial platforms, and then having to normalize it to make it usable, presents a significant opportunity for open banking initiatives and APIs in the corporate cash management space. Turner noted that FinTechs that are able to wield data-sharing opportunities can then automate the aggregation and normalization of financial data across platforms automatically, enabling financial controllers and other executives to obtain their cash positions in near real-time.

At the same time, solutions like the cash automation platform Trovata recently announced are also able to tackle another point of friction for growing enterprises. According to Turner, complex treasury management systems are expensive and take a long time to implement — which might be fine for the largest of the large firms of the world, but not everyone. Data flows via APIs not only enable streamlined access to financial data, but are able to do it much more quickly than some legacy systems available.

Open banking is not a regulatory requirement in the U.S., however, and banks do not necessarily have to open up their data to third party platforms like Trovata’s. Even so, Turner said U.S. banks are open to the data-sharing ecosystem, as shown in the launch of APIs from some of the largest institutions, including Bank of America and HSBC, both of which are targeting corporate clients with their connectivity and data-sharing initiatives.

“Customers are demanding something that’s much more interactive and more integrated, and more visual and BI [business intelligence]-like,” said Turner. “That’s not necessarily in a bank’s DNA to build out those kind of next-gen, product-orientated pieces of their online banking tools.”

He added that Trovata’s recent partnership with JPMorgan Chase exemplifies financial institutions’ willingness not only to open up data to third party solution providers (with client permission), but to actually collaborate with them to build out offerings for corporate customers.

In Trovata’s case, that partnership includes seed funding from JPMorgan, which will be used to focus on product development as the company pilots its cash automation solution with Square Treasury using JPMorgan APIs.

As open banking continues to proliferate in the U.S. financial services space, data security will also come into focus for corporate finance executives even more than today. As more data flows between platforms, it becomes more difficult for security experts to ascertain whether access to sensitive customer information has been granted by the customer or not.

In the U.S., financial service providers will certainly be looking toward the U.K., Europe and other markets that have already implemented open banking regulations to better understand how to approach the multitude of emerging data security questions.

Turner noted that this is another reason why banks are finding it valuable to collaborate with the FinTechs that gain access to customer data: they can ensure that third-party partners have robust data security standards, and to meet the expectations of bank-grade security held both by FIs and corporate end-users.

With faster payments initiatives accelerating the flow of data in the financial services markets, and adding even more pressure on financial execs’ efforts to obtain data in real time, Turner added that bank-FinTech collaboration, and banks’ continued support for open banking initiatives, will grow increasingly important in addressing the biggest points of friction for corporate treasurers, CFOs and controllers.

“[Our partnership with] JP Morgan is an example of how banks are navigating through this,” he said of the push towards open banking, and addressing the changing needs of corporate customers. “They know they need to reach outside themselves to bridge that gap.”

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