15 September 2021
Two maturity curves worth following
Two maturity curves worth following: Open Banking and ERP integration
TreasurUp communicates with many different banks, but also technology providers, around the world.
In that communication two developments are increasingly being discussed: Open Banking/PSD2 for corporate services and corporate ERP integration.
Open Banking/PSD2: there are many reasons for commercial banking departments to allow their small and medium-sized companies to be able to see the total liquidity they have, held at different banks and bank accounts. The main business case is based on cash visibility which most corporate treasurers would like to improve. Supply chain finance is another important one. Banks are trying to find ways to route as many financial handlings via their institution instead of allowing them to be dealt with by bookkeeping platforms (ERP), fintechs, open market ecosystems etcetera.
One way to do this is through Open Banking. The retail side of banks have shown how fast such developments can go. These examples may sound logical, in reality it turns out to be very difficult to accomplish this. The challenge lies in the maturity of Open Banking APIs. These APIs allow for real-time, intraday and overall cash visibility. That is a luxury many finance departments of SMEs can only dream of.
The main challenge for banks to get this right are:
- The Open Banking APIs of banks lack standardization which makes it very difficult to stream data to generic output fields;
- Many APIs only support balance data and lack the underlying transaction data;
- An authorized person on the company side needs to provide a formal consent, every 90 days;
- Banks cannot rely on so-called aggregators yet have mainly focused on retail banking and support limited business accounts;
- If a corporate client of a bank has branches and accounts around the world the chances of being complete and correct with PSD2 are close to zero as Open Banking has mainly started in Europe and certain parts of Asia.
The above items create a situation in which it is virtually impossible to even serve a medium-sized company in Europe with several international subsidiaries and multiple-bank relationships. However, some banks are quite far in offering rather complete Open Banking APIs for a limited number of banks and regions with which they hope to be able to serve a majority of their front-running clients. The good news is that these banks are learning a lot on how to get this right.
ERP integration: banks need to be at the heart of a company’s financial processes. Nowadays, most of these processes run via a bookkeeping or ERP (enterprise resource planning) system. In certain parts of the world, similar to Open Banking, companies find bank connectivity increasingly normal: the Nordics in Europe, India, Singapore and China are common examples. But even in these countries and regions standardization and plug-and-play are far from common practice.
Main challenges for banks are:
- Certain events on the company’s side are not yet registered in the ERP platform: e.g. offers and orders;
- There are many different ERP platforms in the world, so to connect with 2 or 3 will not suffice for a bank. Most ERP vendors do not offer open APIs yet;
- Most companies have configured their ERP in a specific way to make it fit with the way of working in the specific sector. Interfacing with certain common fields for population easily becomes a bespoke trajectory;
- Cloud based ERP platforms are much easier to integrate with than deployed versions;
- Having a holistic view on ERP connectivity. Each business line may have its own view or use case.
TreasurUp wants to be a front runner with both.
That means that it is heavily experimenting with Open Banking and ERP APIs. By doing that we gain a thorough understanding of the latest developments with which we can support our bank partners.
Curious about our viewpoints? We will be happy to set up a video meeting with you…!