Multi-Bank Connectivity Puts The Pressure On Treasury Tech

cross border payments

Financial institutions are investing significantly in embracing online banking and supporting a positive digital experience for their end-users. But when a multinational organization has dozens, or even hundreds of bank accounts at multiple institutions around the world, managing funds via proprietary web portals becomes less of a realistic task, and more of an overwhelming burden of manual task work.

For corporate treasurers of multinational organizations, this task isn’t merely about logging into each online banking portal, either. As Andreas Lutz, CEO of Fides Treasury Services explained to PYMNTS in a recent interview, the challenges associated with managing multiple bank accounts — and opportunities lost when it is done manually — are vast.

“Some treasury analysts still spend fully half their time working with massive spreadsheets,” he said. “And it’s close to impossible to get real-time cash visibility. File formats vary from bank to bank, requiring data to be transformed, or converted, for successful transaction processing, which can lead to significant lag time.”

Tripping Up Cash Management

At the heart of this point of friction, of course, is data. Without the ability to obtain bank account data in real time, organizations and their treasurers cannot quickly and efficiently analyze cash positions, initiate transactions, or forecast cash flow.

“Without centralized data, you can’t have true global cash visibility, making accurate forecasting and liquidity management impossible,” explained Lutz.

Further, the financial risks of this challenge expand into areas like payments fraud and cyberattacks, with Lutz pointing to the growing sophistication of such crimes, and the increasing complexity of identifying them and mitigating these risks.

“Without consistent identity and access management controls, it is difficult to control funds and track who has access to make payments on behalf of the company,” he noted.

Fides aims to address this multi-bank management challenge by offering technology for firms to connect into multiple bank accounts through a single platform, and integrate this tool with existing treasury management platforms. The company recently announced a collaboration with the treasury management system (TMS) provider GTreasury, with Lutz nothing that supporting multiple treasury management system integrations is vital for corporations that are about to adopt a TMS or switch providers as a result of growth, mergers and acquisitions (M&A) or other activity.

The Regulatory Impact

The European Union undoubtedly supports the ability for technology firms like Fides to enable multi-bank connectivity, as well as the U.K. and other markets’ Open Banking initiatives like the revised Payment Services Directive (PSD2). But Lutz warned that such regulations wouldn’t necessarily make multi-bank connectivity processes simple. Instead, open banking regulatory initiatives will promote change in the mechanisms allowing for multi-bank connectivity, and due to a lack of standardization across borders, he warned that regulations could often introduce even more complexities in this space.

So while open banking is opening the door for streamlined bank connectivity, managing that process in a compliant manner across all bank accounts is not necessarily an endeavor treasurers should manage alone, according to Lutz.

“Keeping up with all the legal and regulatory requirements needed for cross-border payments already takes a significant amount of time and resources, and we expect more corporates to want to outsource to the experts so they can focus on their own business responsibilities,” he said.

A similar conundrum is likely to arise as more jurisdictions embrace new payment systems that support faster cross-border transactions. While emerging infrastructure and new FinTech solutions make the possibility of obtaining real-time visibility into financial data as funds move across borders, the ability for a treasurer to manage and make use of that information can become more complex.

That’s not to say such innovations won’t have a positive mark on the treasury management world. Indeed, Lutz said initiatives like the Single Euro Payments Area (SEPA) and SWIFT’s gpi “are a step in the right direction” as corporate payment solutions aim to enhance traceability and visibility of corporate payments and finances.

But with expectations that more corporates will outsource functions like multi-bank connectivity, Lutz said it’s up to these third-party service providers — especially banks — to be up for the task of managing growing complexity resulting from regulations, faster global payment initiatives, and intensifying data integration needs.

“The pressure is on our industry as a whole to deliver solutions that will help corporate treasurers work faster, better and smarter,” he said. “And a lot of that pressure is on banks. Banks have no choice but to change their business models or risk losing customers to newer, more nimble digital players and payment providers. APIs are no longer optional. Integration is no longer optional. And that’s a good thing for everyone.”