Enhancing Bank Connectivity for Efficient Treasury Management

Effective bank connectivity enables companies to perform critical financial tasks - such as paying bills, receiving payments, managing cash, and forecasting cash flow - more efficiently through automation but also with the goal doing it from only one place.

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Without it, businesses must manually log in to each bank portal, upload and download files, and process data in spreadsheets. A flow that can be prone to errors and highly time-consuming. For instance, Payflows customer Evaneos has 50+ bank accounts to manage and before having a modern bank connectivity it took several days each month to perform these operations.

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Implementing comprehensive bank connectivity can be resource-intensive, taking between 12-18 months to integrate a traditional Treasury Management System (TMS) with multiple banks. This is largely due to the varying systems, protocols, and file formats used by different banks, many of which rely on legacy systems requiring extensive coordination and support.

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With Payflows, it takes less than 2 months - if your company has contracts in place with a covered bank. How Payflows help? Centralizing all these different connections in one place and no developers or consultants are required to get a connection up and running: faster & cheaper!

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What is Bank Connectivity and why is it crucial for modern finance teams?

Bank connectivity concept

Bank connectivity refers to how a company exchanges financial data and payment instructions with its banking partners. For treasury teams, having both data access and payment capabilities is crucial for effective cash management.

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Traditionally, financial transactions were recorded in physical ledgers, bank statements were mailed, and payments were made in person. Today, automated connections allows these activities to be fully streamlined. Companies can receive information from banks and send payment files over the internet, saving time, enhancing security, and enabling better financial insights.

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Without Bank connectivity: manual processes

Relying on manual treasury processes - which we call “Human APIs” at Payflows - for payments, data collection, and reporting involves logging into each bank portal individually to enter payments or export data. These processes are manageable for companies but time-consuming and error-prone. Additionally, as a company grows and the number of payments increases, the process becomes more arduous for finance teams.

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This process, particularly for companies with multiple entities or banks, can take several days, resulting in outdated reports. Manual payments require entering details into bank portals or uploading files, which, if done for multiple banks, becomes even more time-consuming and risky. Above all, this exposes the company to high risks, such as data entry errors, inadequate approval controls and payment delays.

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Pros & Cons of 5 main bank connectivity methods

Host-to-Host (H2H/SFTP)

H2H remains a gold standard for bank connectivity, enabling secure, automated data exchange between a company and its banks without manual intervention. This method uses standardized file formats like ISO 20022 and BAI2 to exchange a full range of financial data, including payment instructions and account statements.

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Pros:

• Reliable and secure.
• Supports large volumes of detailed financial information.
• Long-established and standardized.

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Cons:

• Data is typically not available in real time, usually sent daily or intraday.
• Requires unique connections for each bank.

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Corporate Banking APIs

APIs enable real-time transaction processing and provide programmatic access to banking services. These APIs are often more mature and better maintained than open banking APIs.

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Pros:

• Real-time data access and transaction processing.
• Easier integration with well-documented APIs.
• Enhanced financial insights and process efficiency.

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Cons:

• Reliability varies across banks: some banks may not maintain APIs well enough for corporate use.
• Could not cover all business needs like doing payments if APIs were not developed this way.

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Electronic Banking Internet Communication Standard (EBICS)

EBICS allows direct connections with multiple banks using a standardized protocol. It supports a broad spectrum of financial transactions and ensures secure communication with banks.

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Pros:

• Reliable and efficient.
• Allows connections with multiple banks using a single and consistent protocol.
• Supports a wide range of banking transactions.

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Cons:

• Limited availability outside Germany, France, Austria, and Switzerland.
• Charges per-message fees - in most cases, potentially leading to high costs.

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SWIFT Network

SWIFTNet is a global messaging network connecting over 11,000 financial institutions. It provides standardized messaging for financial transactions, ensuring consistent and reliable communication worldwide.

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Pros:

• Global coverage of 200+ countries with robust security.
• Supports a wide range of financial messages.
• Single gateway to thousands of banks.

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Cons:

• Costly to implement and maintain direct connections.
• Most expensive network as charging per-message fees, with high fees so high costs

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Open Banking

Open banking APIs, driven by regulations like PSD2, allow licensed third parties to access customer payment and account data with consent. While mainly used for consumer applications, they can be a cost-effective option for smaller businesses.

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Pros:

• Cost-effective for smaller businesses.
• Quick implementation if the provider has pre-existing connections.

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Cons:

• Most of the time: no ability to pay and limited to statements.
• Less prevalent outside Europe and the US.
• Often lack reliability and data quality needed for advanced treasury operations.

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3 points of concerns to have in mind regarding Bank Connectivity

Ensure Data Quality and Reliability

High-quality data is essential for accurate reporting, forecasting, and planning. Established methods like H2H, EBICS, and SWIFT generally provide reliable data. Payflows ensures connectivity with an uptime of 99.99% and above, guaranteeing consistent and error-free data transfer.

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Optimize Payment Capabilities

Choose connectivity methods that support a wide range of transactions, including bulk payments, international transfers, and multi-currency payments. Established methods like H2H, EBICS, and SWIFT are known for their reliability and security, making them suitable for complex and high volume transactions.

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Integrate with Existing ERP Systems

Ensure your bank connectivity solution integrates seamlessly with your company’s ERP or accounting systems. Payflows offers prebuilt, no-code integrations with platforms like NetSuite Oracle and Microsoft Dynamics, enabling automated financial processes and simplified reconciliation.

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Conclusion

Efficient bank connectivity is vital for modern treasury management, enabling automated and secure financial operations.

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By leveraging reliable connectivity methods and implementing solutions to enhance data quality, payment capabilities, and ERP integration, companies can optimize their financial processes and achieve significant time and cost savings.

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Payflows is committed to providing comprehensive and flexible bank connectivity solutions, ensuring that your business can manage its finances efficiently and effectively with any bank and any payment.

To speak with a Payflows expert and understand how Payflows solution can help your Treasury team to gain time and money and reduce risks, book a demo here!

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