Managing a variety of liquid assets, funding international commerce, maximizing working capital, and monitoring risk are all essential in today’s global economy. Traditionally, banks have supported these aims via a variety of digital banking solutions. As a result of increased competition from fintechs and digital banks, many incumbents see their market share shrink. With the help of B2B APIs (application programming interfaces), banks may get closer to their customers in the value chain. Through these interconnecting technologies, customers may more easily access GTB services from their own platforms and engage with third parties in real-time.
Banks with the greatest potential for development are prioritizing GTB integration efforts on goods. CFOs anticipate cash management and trade finance to be the growth engines for their companies during the next three years. We are talking about a company with a worldwide yearly revenue of $1 trillion here.
Four significant legislative and technological factors are altering the GTB environment as executives explore how to maximize growth opportunities:
- As a result of open banking regulations, the systems landscape is becoming more dynamic and inventive.
- Off-the-shelf apps are being replaced by digital channels that provide personalized service.
- The accuracy of liquidity forecasts is being improved thanks to advanced analytics.
- Using blockchain and distributed ledger technology, supply-chain financing is being digitized.
A flexible and iterative reaction to these developments may be achieved via the use of API platforms. The problem is that many banks have not made the necessary investments and, as a result, are in danger of being overtaken by more seamlessly connected rivals who can better meet their customers’ demands. What’s the summary? GTB should focus on B2B API integration as a priority.
B2B integration: the state of play
To interface their GTB services with their customers’ systems, many banks have traditionally relied on technologies like SFTP and host-to-host file transfer based on old web services. Cash management services, such as payments, transfers, and cash pooling, extensively use these solutions. However, they suffer when dealing with conditional routing, even if they function well for one-step transactions. Therefore, they cannot be utilized to integrate more complicated goods.
In terms of file-based integration, the following six issues need to be addressed:
- Format mismatches are handled with minimal exception handling.
- Following a network or system loss, manual failure recovery
- Lack of safeguards to prevent file manipulation and man-in-the-middle attacks on sensitive data
- Long onboarding timeframes for customers—up to six months or more
- Large file formats for ERP integration, which need customizing for each business
- Operational costs will be higher because of the necessity to operate and maintain certain software.
Enter B2B APIs.
In order to provide discrete operations to their customers and partners, banks might use B2B API platforms, like the Oracle digital banking experience. They usually operate in a closed network, helping to integrate GTB features into clients’ operations in an easy and safe manner. For instance, an Indian bank partnered with an internet delivery firm to provide real-time settlement and immediate wage payments. Similar to automating invoice reconciliation processes in ERP systems, using cash management APIs is becoming more popular.
Adoption is also being fuelled by the rise of open standards and public goods infrastructure. Nearly half (48%) of the survey participants said they aim to increase trade finance APIs as part of their digital innovation plans in the next three years, and over 86% plan to invest in cash management APIs.
Building a B2B API platform: Five success factors
Internal security and operational risk controls must be balanced with business requirements on process flow and flexibility when building an API banking platform. In order to address these competing priorities, a well-designed B2B API platform will create a culture of co-ownership with clients and partners, thereby reducing time to market and spreading the cost of innovation. The most successful GTB players tend to rely on a combination of five factors for their success:
- Embrace a product development mindset
It is essential that APIs be treated like any other new product or technology when they are created, tested, and promoted. With the exception of these two key aspects:
- Design for process control and orchestration: It is imperative that banks implement end-to-end processes in operations, including domestic payments, import letters of credit advice, and currency rate booking using APIs. The IT team should intend to construct 40 to 50 APIs that can be orchestrated in ERP systems, conduct essential validations, and handle exceptions for the benefit of the customers.
- Weigh tradeoffs between a channel and product approach: Individual teams would have to construct their own workflow and data structures before integrating them into current systems to provide new APIs for transaction banking. As a result, banks may avoid expensive duplication by developing APIs as routes to their current products (online banking, trade finance systems) and therefore using the account mapping, business logic, and security measures that already exist.
- Set up a modern API lifecycle management platform
Banks may pick open-source or enterprise-level solutions that are either cloud-based or on-premise, as long as they meet the following requirements:
- In order to expose and govern the use of APIs, an API gateway is needed.
- Policy and version management, SLA performance monitoring, and environment access are all handled by this API publisher (sandbox, UAT, and production).
- Discovery, onboarding, and administration of API developers, as well as documentation and reporting.
- For operational data, business metrics, invoicing, and metering, API analytics may be used.
Individual application owners working on downstream systems may continue to own the fundamental business logic, error handling, logging, and improvement of their applications. A RESTful and microservices-based approach to service contracts is necessary, though.
- Extend risk management and operational controls to API-based offerings
There should be an extension of risk and operational controls for API-based solutions, assuring compliance with regulatory requirements.
- Align security and regulatory controls: An API service must meet security and regulatory standards by adhering to established confidentiality, integrity, and availability models. IP whitelisting, client ID and secret keys, digital signatures, and hashed payloads may all be used to accomplish these security measures. Combined. The collections API suite of a major worldwide bank uses a hardware security module (HSM) for dynamic key management.
- Amend client undertakings and legal contracts: Contracts with corporate customers may not include API-based integration conditions. To make system-to-system communication and straight-through processing (STP) easier, banks may need to establish new terms and set transaction limitations.
- Leverage partnerships and self-service solutions for customer acquisition
In order for banks to unleash new potential for innovation and increase their client base, they need to build up their ecosystems first.
- Form partnerships with software-as-a-service finance companies: Cloud ERP and fintech clients of GTBs may benefit from downstream banking services, allowing them to reach new markets. A cloud CRM solution provider helped a bank enroll new SME clients by providing back-end banking services for vendor payments and consumer refunds.
- Simplify customer onboarding: B2B API services may be used by corporate client users who have the proper authorization if banks establish marketplace products and self-service onboarding routines. Clients may test APIs and communicate directly with the API owners via a number of banks’ API stores, which serve as test-and-learn platforms.
- Define an API taxonomy to accurately assess system readiness, avoid the proliferation of incompatible APIs, and prioritize business value
An API taxonomy may assist banks in defining ownership and governance criteria. For banks, taxonomy is a matter of personal preference, depending on their own platform design. Here’s a typical method for layering definitions:
- For a particular user experience, APIs are developed for a single purpose and allow all data consumption from a single source.
- Process APIs make it easier to manage processes inside and across systems by abstracting away the implementation details of various source systems.
- Users may access fundamental system data using APIs that handle CRUD (create, read, and update/delete). APIs also protect users from system complexity and allow the reuse of data across many projects.
Both experience APIs and process APIs should be managed by channel teams. Ownership of system APIs should be delegated to applications. According to one bank, another way to prioritize APIs is to group them under umbrellas like regulatory APIs, build-to-stock APIs, and third-party APIs. The bank discovered that the strategy helped to encourage internal innovation and externally monetize its APIs.
As a result of combining best-in-class services with an extensive API feature set and seamlessly integrating them into client systems, a number of GTB fintechs have attained unicorn status (valuations in excess of $1 billion). Global banks, on the other hand, are spending their GTB IT expenditures on technological advancements, such as OBDX, in order to stay relevant. As a result, banks that haven’t yet taken action need to quickly upgrade their API offerings and work with clients to stay relevant in a rapidly changing market that is becoming more crowded.