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AFP 2023 Blog

AFP 2023 Blog

AFP 2023 Blog

API-Based Payments: Direct-Rails Access for Treasury Teams That Is Disrupting the Status Quo

Oct 5, 2023

By Brett Turner, Founder & CEO at Trovata

In 2023, the world of corporate payments is still fragmented.

We use one method to issue payroll, another to pay (domestic) suppliers and a third for cross-border transfers. Most of the time, we have to wait at least a day for any of these transactions to be processed. Add the varying fees based on method and destination, and things are just ... not as streamlined as they should be.

"As they should be," we say, since there's an obvious contrast here with consumer payment methods! Apps like Venmo or PayPal allow users to easily send money, no questions asked, and the person on the other end has those funds available almost immediately.

Fortunately, the corporate sector is finally beginning to catch up.

Enter real-time payments (RTP), the first new payments rail in the U.S. since the introduction of ACH back in the 1970s.

Offered by the Clearing House and (since July) the Federal Reserve, the RTP payments rail guarantees transactions of up to $1,000,000 are completed instantaneously. 

For companies, that means no more uncertainty as to when payments will clear — ideal for getting a handle on cash flows and maximizing earned interest on corporate funds. 

Real-time payments are not only faster but also cheaper than wire transfers (the new silver medalist when it comes to speedy transactions). Since settlement is immediate and data formats standardized, reconciliation of RTP transfers also starts miles ahead of other methods.

The Big Change: Open Banking

What is open banking? Open banking is a system based on the novel concept that your own banking information belongs to, well, you. It says companies should be able to leverage that transaction history, using it to gain actionable insights, build short- and long-term strategies that reduce risk and promote sustainable growth. 

Also known as API banking, open banking is a system whereby all data, across potentially dozens of bank accounts, is centralized in a single platform — a piece of third-party software.

This means that, in addition to payments, open banking provides the solution to another huge corporate problem: visibility. When we have so many bank accounts, spread across continents and currencies, visibility seems just about impossible to attain. 

Rather than expecting finance to log into each bank portal and record everything in spreadsheets, wouldn't it be great to simply have all corporate information right in front of you?

That's the vision behind open banking and is already a reality for many companies.

There's an easy comparison here: Apple Health. Apple Health consolidates a range of different information: steps walked, health records, blood sugar, sleep hygiene and more. Where in the old days we'd have to view each piece alone, APIs bring all that information to a single platform. 

With open banking, the situation is exactly the same. APIs are what enable communication between banks and those third-party platforms. There's no need to view each bank account in isolation — you get a holistic picture of your company's financial health, viewing each moving piece in near real-time.

And that means you can strategize in a way that would’ve been unthinkable in the not-so-distant past.

RTP and Visibility

If there's one thing we've learned over the past few years, it's that liquidity management will be the name of the game going forward.

Clear visibility and real-time payments work together to help you create a tight liquidity management strategy, where every dollar is visible and can be allocated toward its best use case.

How do you determine that best use case? Once again, the data provided by open banking — your data — helps here. First of all, you have a clear view of your current position. Next, analysis can be performed to identify trends and build forecasts, helping you use cash in the most effective ways possible now, while not risking your liquidity position later.

The fact that data is recorded automatically means forecasts can be trusted (no spreadsheet errors). Not to mention, the consistency of real-time payments — they can't be reversed — helps those forecasts become even more accurate. With open banking, the data from real-time payments can be immediately incorporated into real-time, constantly moving forecasts. Based on this data, authorized users can then make payments when and where they need to, helping achieve the desired end-of-day cash position.

With real-time payments and visibility, things are set to change in the world of corporate finance thanks to open banking APIs. Join us at AFP 2023 for “Disrupting the Status Quo with API-based Payments,” a panel discussion on how these changes will transform the way companies do payments and manage money.

Moderated by J.P. Morgan's Ray Nazloomian, Head of Payments Innovation & Fintech Partnership, you’ll hear from thought leaders from the treasury team of Block (formerly Square), along Trovata, a fintech leader pioneering API bank connectivity. You'll learn how you can:

  • Leverage real-time payments to save fees and build a strong cash position.
  • Automate payment processing without IT involvement.
  • Hold onto money as long as possible, leading to higher returns.
  • Achieve company-wide visibility, regardless of size.

We’ll see you at 10:30 AM PT on Tuesday, October 24 in Ballroom 20BC for the session!

Check out the full lineup of AFP 2023 sessions on the Session Explorer.