Leveraging bank connectivity for commercial advantages

Establishing a secure, reliable and scalable communication channel with your banking partner is essential to exchange financial transactions and the liquidity and risk information that underpins the business efficiently. However, as every organisation has a different business model, operational processes and technology infrastructure, their bank connectivity needs are also specific to their business. As a result, with the expertise of a committed partner bank, treasurers and finance managers should explore the various options that exist and decide on the best fit solution for their organisation to meet their current and future needs.


The case for digitisation

Implementing a connectivity solution for the first time is a daunting prospect. Many organisations have developed and refined their processes over many years and are therefore reluctant to change. Consequently, although a variety of digital solutions exist for corporate-bank connectivity, most organisations still exchange transactions and information with their banks manually, such as via letter, fax or visiting branches. Manual payment instruments, such as cheques, still appeal to business owners who prefer the assurance of signing cheques physically, and use of the ‘float’ period and post-dated cheques can appear to offer working capital advantages.

However, the cost and resource implications of cheque processing and manual delivery of bank statements are significant, payment timing is unpredictable, and security risks are very high. In contrast, digital connectivity solutions enable companies to transmit payment instructions securely and conveniently, receive timely, accurate bank statement information, and access a range of other services through a single channel. Approvals are far more robust, often with the convenience of using mobile tools to review and approve transactions. Security is enhanced with the use of digital tokens and out-of-band transaction approvals, and users and executives benefit from the ability to access bank information ‘on the go’.

"While security and control is a priority for every company, this has become far more  apparent amongst Asian companies. Consequently, adopting a proven digital solution that does not require substantial IT effort can be a valuable way of promoting the company’s security objectives."

Raof Latiff, Head of Digital, Institutional Banking Group, DBS


Web and mobile banking: embracing familiar technology in a corporate environment

Companies that need to connect to a bank for the first time will typically opt for a web-based portal, which is straightforward to implement and easy to use. Also known as online banking, which often includes mobile access, a digital gateway is becoming the default means for banks to deliver services to their clients. As treasury and finance professionals, business owners and managers become accustomed to using online and mobile banking for their personal accounts, these tools are becoming more acceptable in a corporate environment. These channels can be integrated with internal systems to avoid the need to rekey information between systems, reducing the risk of error and fraud and enabling processes such as reconciliation and account posting to be automated.



Host-to-host connectivity: delivering scale, resilience and automation

While web-based and mobile banking meet the needs of the majority of businesses, from small and medium-sized enterprises through to mid-cap and larger businesses, companies  that process high volumes of transaction and information, including large corporations, non-bank financial institutions such as insurance and public sector bodies typically seek a higher degree of process automation and integration of transactions and information with internal systems. Consequently, host-to-host connectivity is becoming increasingly popular. This involves integrating a company’s enterprise resource planning (ERP), payments and/ or treasury management system directly with bank systems, so that the exchange of transactions and information is seamless. This solution is more complex from an IT infrastructure perspective, but the advantages of straight-through-processing of transactions and information are considerable, reducing manual interaction, enhancing security and control over transactions, and facilitating automated processes such as reconciliation.

"Host-to-host connectivity is becoming increasingly popular amongst Asian corporations as they recognise the advantages of security, scalability and automation. As companies in Asia expand their geographic footprint, they are more likely to invest and engage with sophisticated corporate-bank connectivity, as well as consider multi-bank connectivity channels such as SWIFT."

Raof Latiff, Head of Digital, Institutional Banking Group, DBS


Open APIs: innovation, integration and business transformation

While web-based and host-to-host based solutions have become well-established, and are therefore familiar to many treasurers and finance managers, we are seeing significant innovation emerging in corporate-to-bank connectivity. An important example is the ability to use application programming interfaces (APIs) as a means of exchanging information between a company’s internal systems and the bank, as demonstrated by DBS’ IDEAL RAPID solution. APIs are already familiar to users of smartphones, for example, as many apps, such as weather forecasting, city mapping tools, and many others pull data from one or more sources and combine or transform the data as required before presenting it to the user.

In banking terms, open APIs, which can be accessed by a third party or developed by the bank, enable companies to integrate banking services and data directly into their own solutions, to create bespoke financial and supply chain processes, link bank services directly into their own customer offerings or harness ‘big data’ to understand and respond to consumer trends.

"The use of open APIs offers opportunities for companies of all sizes, and can be used to create significant competitive advantages. Initially, the greatest interest in APIs is likely to come from organisations operating in the business-to-consumer (B2C) space, but there is also significant potential for business-to-business (B2B) companies to create a seamless commercial and financial ecosystem. It is entirely conceivable that we could see all supply chain participants connected to a cloud to transact and settle business seamlessly without the need for one-to-one connectivity with each other or with the banks through which financial transactions are settled."

Raof Latiff, Head of Digital, Institutional Banking Group, DBS


The development of API-based solutions illustrates that a strategic digital connectivity can create significant operational advantage, as well as commercial and competitive advantages. Recently, for example, DBS has worked with insurance giant MSIG to implement online travel insurance claims with rapid electronic payment, while drivers of Grab, Southeast Asia’s leading ride-hailing platform, benefit from the convenience and security of app-based cashless payments.

To select the right bank communication channel, whether web or mobile-based, host-to-host or leveraging APIs, it is important to be able to access insights and advice from your banking partner to assess how best to streamline processes and controls, manage risks, and create new operational and commercial opportunities.

"We have seen adoption of host-to-host solutions double in recent years, while interest in API-based solutions is also growing fast as the concept matures and use cases become clearer. Our pioneering API-based solution IDEAL RAPID is increasingly being used to create unprecedented opportunities for our clients and their customers, while we also continue to collaborate with accounting platform providers such as Xero and Tally to deliver highly innovative, integrated connectivity solutions for our clients."

Raof Latiff, Head of Digital, Institutional Banking Group, DBS


Creating business and financial ecosystems

In the next two to three years, manual exchange of data and transactions between banks and their clients is likely to become obsolete, with the majority of companies adopting web and mobile-based banking solutions for corporate–bank connectivity. Meanwhile, the use of host-to-host and API-based solutions will continue to grow rapidly, the latter fuelled by further innovation from fintech companies offering convenient, ‘plug and play’ solutions. While there has been some speculation that fintechs may disrupt or disintermediate banking services, banks have a huge amount to gain by developing fintech partnerships, creating the commercial and financial ecosystems that will increase the reach of banking services and therefore the opportunities for banks, fintechs and customers alike.


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