Harnessing APIs for Treasury Efficiency

Real-time connectivity is the key to transforming treasury processes and gaining efficiencies. Here, Séverine Le Blévennec, Global Head of Treasury, Aliaxis, and Pablo Leguina, Head of Customer Success, Embat, discuss how to unlock value from data in order to make better, faster, and smarter decisions.

In their personal lives, treasurers can access information and make decisions in the here and now. They can research products, order an item for same-day delivery, pay for the item, and receive confirmation of the transaction in moments. Instant gratification is a sign of our times and technology has made real-time interactions a reality.

But when it comes to treasury management, the experience for many in their professional lives lags behind what they have come to expect outside the office. Having real-time information at their fingertips may seem like a pipe dream, and the data they do have access to is often too old to be of much use when faced with making decisions without delay.

Plugging treasury systems directly into Swift’s messaging network or creating host-to-host bank connections has been an option for a number of years. However, many corporates have not made the leap to this connectivity, and their treasurers are still relying on bank statements, Excel spreadsheets and manual labour to obtain the information they need.

Leguina comments that the reasons for pursuing connectivity remain the same: treasurers need access to up-to-date data about their cash positions. Yet, despite the option of connectivity being available to them, many are still logging into bank systems every morning and updating a spreadsheet. “It surprises me the number of companies – even reasonably large ones – that are still being run in this fashion,” admits Leguina.

This is one of the pain points that many treasuries face in accessing bank-balance information. Another issue, Leguina notes, is obtaining transaction data and not having visibility on collections. A further complication is that many treasuries are relying on local teams in different time zones to retrieve data.

Not only do treasurers struggle to gain visibility of their cash positions, there is also the security risk that is inherent with having to log into separate systems. “If you don’t have connectivity, what you probably do have instead is a number of banking credentials floating around”, warns Leguina. This can become difficult to manage, and especially problematic when people leave a company and still have access to multiple systems.

In search of the cherry on the cake

Corporates have long had the opportunity to connect directly to banks and Swift, but the cost of doing so was a major hurdle. Leguina notes that one or two decades ago, banking connectivity was limited to the major corporations because running a Swift connection was relatively expensive. These days, however, the implementation is not so burdensome.

Leguina makes the distinction between connectivity and real-time connectivity. Ultimately, he says, real-time connectivity, which relies on APIs, is necessary for corporates to gain the full potential of treasury efficiencies. In the first instance though, the connectivity itself is crucial, whether it is real-time or not.

Le Blévennec comments: “For me, connectivity is really the way to unlock value in the company because otherwise we just have silos of data. I would say that the benefit is really in the connectivity itself”. If this is in real time, then it is an added bonus – “the cherry on the cake” – that enables more efficient treasury management.

Having this real-time cherry on top suits certain companies better than others. For some, Le Blévennec points out, there may be only a marginal benefit from going from an intraday statement every 15 minutes to a real-time view via APIs. Others, such as insurance companies dealing with large volumes of payouts, which could be triggered by smart contracts that ensure customers get paid within hours, would benefit greatly from having a real-time view.

Another obvious use case would be e-commerce companies, where there is an extremely high volume of low-value transactions that are a consequence of their customers’ real-time expectations – and customers’ need for instant gratification.

With real-time connectivity in place, Leguina says, companies are able to make informed decisions about using liquidity lines, optimising the cost of funding, and gaining operational efficiencies.

Pick the right moment to make improvements 

There are challenges, however, with establishing real-time connectivity because there is still a lack of standardisation among banks with APIs. Because this can be difficult to navigate, Le Blévennec advises that treasurers should first rationalise the number of banks they deal with to minimise the volume of connections that need to be made.

Leguina also comments about such issues: “APIs are still a relatively new piece of technology – they have not been around for decades – and they are different from one bank to another or from different providers”. For this reason, he says, it is important for treasurers to be careful about the technology provider they choose to work with. “Make sure you obtain references, and make sure you carry out proper due diligence of which firms you are going to work with in terms of getting API connectivity”, Leguina advises.

Another issue that may crop up is the legacy systems of the corporate; the APIs may be ready, but the existing systems may not be ready to connect to them. Companies are at various stages of maturity regarding their digital transformation, points out Leguina, and they may have to adapt their approach.

For corporates that have their ERP system in the cloud, for example, they have the advantage in terms of developing connectivity with APIs. This can make the exercise more streamlined and lighter, rather than having to upgrade various systems before the connectivity can begin. Some systems, however, may need to be upgraded. This could be a long process for some corporate treasuries. Le Blévennec advises: “You need to find the right moment to start your connectivity journey.”

Data: a corporate’s gold mine

One of the major hurdles around reaping the benefits of real-time connectivity is ensuring that the data is in the right place. Le Blévennec comments that data challenges have been among the top obstacles that she and her team have faced. When she joined the company, she says, the treasury data was limited. There was a system for the IHB, but outside that there was not a centralised view of the data, apart from a consolidation tool, which was not very detailed, that was completed on a monthly basis.

She explains that the TMS was set up recently and many of the conventions for handling data needed to be defined, and they also had to build the access to the data in the first place. It was necessary, she explains, to train the team extensively and instil the idea that data and treasury is about today – not the end of the month.

“In treasury, we want to know where are we today and where we will be the next day or in a month’s time. It’s a change of mindset about how data is managed, rather than viewing it as an accounting system,” says Le Blévennec.

This requires a mental shift for many: “There needs to be a mindset that data is a corporate asset in the same way as cash is a corporate asset,” Le Blévennec points out. “You shouldn’t have to ask affiliates whether it’s all right to access their data.”

Alongside this, she adds that it is important to set up a monitoring process on the data quality and ensure that everybody understands how the data they produce is going to be used.

“There is a person or team that is responsible for the data – you need to reach the right person so they understand that this is the gold mine of the company,” says Le Blévennec. After that, everyone along the chain that touches the data should understand why data quality is important. Also, there needs to be a reporting mechanism that can identify missing data or data that is out of range.

Getting to this point may require staff to be upskilled, which in turn offers  an opportunity for career development. As a technology project such as  this develops, Le Blévennec says: “It’s important to build the knowledge internally, as you are growing, by developing existing people.”

The route to real-time connectivity

Once these types of challenges are overcome, the corporates will then be on the path towards realising the benefits of real-time connectivity.

Leguina emphasises there will be an impact on treasury operations because there will no longer be the same levels of investment of time and resources on manual tasks like updating bank balances and extracting transaction data.

By automating the tasks that don’t add value, such as manual bank reconciliation, treasurers can turn their attention to matters of higher importance. “Real-time connectivity gives you the possibility of focusing on the more strategic aspects of treasury”, emphasises Leguina.

Also, treasurers will be able to make working-capital decisions on a real-time basis and won’t be drawing conclusions based on yesterday’s information, points out Leguina. The impact, ultimately, is that it is possible to make better-informed decisions that will benefit the treasury in particular – and the company in general.

Corporates may choose to achieve this through a phased approach or as part of a ‘big bang’ transformation project. Leguina comments that it may make sense for a large corporation to start at its headquarters, and once there is proof that the real-time connectivity is working, they can roll it out to other regions.

Le Blévennec reiterates that connectivity is really the key to unlocking value in treasury data. She says it is important to carry out a cost-benefit analysis and assess what the usage will be and how the data will be employed. As part of this process, it is important to communicate clearly with all stakeholders. “Speak to your partners, speak to your bankers, speak to your IT team – bring multifunctional teams together to make that assessment,” she advises.

And, finally, Leguina says: “Many years ago, establishing connectivity took months – now connectivity could be a matter of days.  Real-time connectivity is a reality – it is here to stay. It is going to help unlock value and enable treasurers to be more effective when making their day-to-day decisions”.