APIs Explore The Opportunity Of Mid-Market Liquidity Management

As open banking frameworks take root in more markets around the globe, the model of data integration continues to also take shape in the business financial services market, particularly impacting micro- and small businesses (and the FinTechs that service them).

The middle-market business customer, however, has not necessarily been the focus of open banking initiatives or bank-FinTech collaborations. That’s likely going to change, according to AccountsIQ COO Darren Cran, who recently spoke with PYMNTS about the opportunities APIs present to knock down silos in corporates’ back-office financial processes.

For AccountsIQ, the latest embrace of open banking comes in the form of a collaboration with TransferMate, which has now integrated cross-border payments capabilities directly within AccountsIQ’s accounts payable portal. Cran explained that APIs can have a significant impact on middle-market firms’ ability to manage global payments, with benefits that go beyond moving money from Point A to Point B.

“In the middle market, businesses are becoming more international,” he said. “It used to be something that was for much larger corporations, but now the middle market is trading in foreign currencies much easier and more quickly.”

However, as the demand for cross-border payments grows in this segment, so does the risk of issues like foreign exchange (FX) volatility, as well as added friction linked to manually managing FX and cross-border payments in separate bank portals.

“FX is a complicated area,” added Cran. “One mistake can make a big difference.”

Open Banking’s Cost-Saving Opportunities

Among the largest benefits of integrating cross-border payments and FX management capabilities directly within an accounts payable platform is the bottom-line impact of accessing wholesale FX rates through a service like TransferMate. Even when pre-booking rates with banks, said Cran, costs can be significant – particularly as FX volatility of the world’s major currencies continues to grow.

But there are additional benefits to an API integration for cross-border payments, he noted.

There are also the knock-on costs a business incurs as a result of the complexity of those payments, which means they tend to require additional oversight and checks by executives within a company.

“You’re dealing with expensive time,” noted Cran. “This is a fairly significant cost for businesses, particularly in terms of the treasury management point of view. Making sure they’re able to move that money around with a minimal amount of charge is really important.”

Automation of FX hedging and global payments also mitigates the risk for error, which can be potentially costly for businesses operating across borders, Cran noted. API integrations not only enable professionals to manage FX rates, invoice data and transaction information, but also helps ensure that information is automatically moved from one place to another without the risks of error associated with manual data input.

Beyond Cross-Border Payments

APIs aren’t only knocking down barriers that once separated FinTech platforms from banking portals. They’re also knocking down barriers that once separated individual financial processes in businesses’ back offices, including accounting, accounts payable and payments.

But cross-border transacting is far from the only application for open banking business models, and Cran said AccountsIQ is looking at a vast array of applications for data integrations.

Integrated settlements within accounts payable and accounts receivable, integrated banking, charge cards with data automatically linked to an accounting portal, the addition of invoice factoring capabilities – all of these are financial services and products that now have the potential to exist within a unified platform, thanks to open banking.

As Cran noted, the benefits are vast, too, from reducing the manual workload associated with toggling from one platform to another and manually entering data into each portal, to unlocking companies’ financial data to obtain better loan rates from financiers.

And as open banking and API integrations continue to find footing in the middle-market community, Cran said the positive impacts on those businesses will similarly proliferate.

“There could be a huge positive benefit of liquidity in the middle market,” he said of data integrations’ ability to enable a single source of truth for company financials. “And I think genuine, real-time information, with automation and banking and settlement, will mean business owners of the middle market will be able to get real-time daily visibility.”

This transformation won’t occur overnight, however – particularly when it comes to middle-market financial services. But the gradual shift will also give way to the ability for technologies like blockchain and robotics automation to make even further progress in helping middle-market corporates achieve greater control over (and visibility into) their money.

Cran alluded to the advent of the smartphone in demonstrating the magnitude of open banking’s eventual impact on the business community.

“Smartphones have transformed the lives of consumers in terms of being able to book things, manage things, bank online – everything is so seamless,” he said. “That hasn’t yet happened in the middle-market business world, but we predict it’s going to start happening.”