• Anoop Basavarajaiah, Business Analyst at Finastra


• 04.08.2017 10:45 am
undisclosed

Integrated payables and receivables is not a new concept, but a clear-cut definition of what it entails does not exist. At minimum, it must enable corporates and banks to be able to support straight-through processing, multiple payment formats, self-service payment processing for clients, and configurable compliance screening, accounting, and calculation tools.

At its base, the technology behind integrated payables and receivables serves as a vehicle for the transformation of manual input transactions to a secure digital format. And as most corporates are now able to realize the benefits of integrated payables and receivables to some degree, the next step is to bring together payables and receivables on a single platform with extended APIs.

Imagine a bank with siloed payment processing spread across several distinct payment platforms. That bank may provide a fragmented and inconsistent customer experience because of its platforms’ inability to speak to each other  due to multiple, non-standardized formats. The bank would be further challenged by significant over-investment in staff and time to address exceptions, negatively impacting revenues. By consolidating all payments onto a single engine that can process multiple payment types (including high-value, wholesale and mass payments) the bank streamlines processes, eliminates associated expenses, improves risk management, simplifies integration with other services applications, and improves the customer experience immensely. It achieves 99% straight-through processing on online transactions. And by having a single platform, the bank is able to react faster to customers, new product requirements and regulatory changes.

This represents a true story for one U.S. bank, and illustrates the benefits of integrated payables and receivables on a single payments platform. But getting to this point had not been an easy road. It required significant investment, and significant infrastructure disruption to overhaul its payments technology. Still, the payoff made the journey worthwhile.

Fortunately today, new technology concepts are making the journey to achieving next generation integrated payables and receivables much easier and allowing platforms to integrate without disruption. By having the right technology in place a bank or corporate can future-proof its investment in integrating payables and receivables, ensuring the technology can evolve with changing needs. APIs are the future of banking technology, and are enabling the next generation of integrated payables and receivables.

Far from being a new concept, Application Programming Interfaces, or APIs, were originally developed 15 to 20 years ago in the era of enterprise systems and service-oriented architecture (SOA), and are essentially software tools that enable disparate systems and applications to talk to each other and share processing and data. They are a set of subroutine definitions, protocols, and tools for building application software. Using an API, a financial institution can digitize payables and receivables, and ensure that payments are processed uniformly regardless of their source. This means that the API can help to proactively monitor status, pre-validate transactions to corporates, and streamline the end-to-end financial supply chain, handling multiple payments types in a singular way.

With technology expansion, APIs enable corporates and financial institutions to realize a smooth integration with payment services, and enhance the business processes that are already in place. An API can also help to boost revenue by reducing the need for additional fine-tuning of programming skills. API capabilities can also be used within existing business applications to identify new opportunities that can create value within a financial institution’s business systems.

With an API, corporates can pre-check payment processing without submitting the actual payment. Pre-check includes: risk management, total cost on processing, payments SLA time, and funds management.

Now, regulatory changes and market pressures are encouraging the use of open APIs, and these represent the next phase of delivering a robust payables and receivables solution. Open APIs are APIs that can be accessed by external forces, enabling them to link external applications to the development ecosystem. Open APIs drive innovation and further growth in customer-centric applications. For integrated payables and receivables, open APIs offer three important benefits. They enable business services that transcend the typical intra-bank or corporate infrastructure. They provide an extension of value-added payment services beyond organization borders through channels, clearing partners and systems. And they allow for the integration of an extra security layer Multi Factor Authentication.

Integrated payables and receivables allow corporates and financial institutions alike to expand market share and increase revenue growth with complete integration, transformation, automation, and immediate confirmation of financial messages; grow their business by providing innovations in new business areas with minimum development and software coding; and stay current with FinTech competitors and offer the customer-centric approach that the mobile generation expects. Working off of a properly API enabled payments platform, financial institutions are able to bring these solutions to light with minimal investment. Through the availability of open APIs, these institutions can offer their corporate customers the most robust integrated payables and receivables services.