Trends & Vision

Treasury Essentials: APIs in 60 Seconds

Published on 23.09.2019

Application programming interfaces, or APIs, are constantly mentioned in financial circles today, but just what are they? They are certainly no passing fad and they offer treasurers new ways of working, moving on from batch processing into a real-time environment, facilitating more efficient payments and delivering working capital management benefits – as well as the ability to seamlessly interface with different systems.

Defining APIs

In computer terminology, an API is a set of subroutine definitions, communication protocols and tools for building software. A more general definition is that it is a set of clearly defined methods of communication among various components. A good API makes it easier to develop a computer program by providing all the necessary building blocks that are then put together by the programmer. Different software applications can communicate with each other via an API and provide connections in a fraction of the implementation time previously necessary.

Anyone with a smartphone or a LinkedIn profile will have used APIs in one form or another, usually without knowing it, but the EU’s revised Payment Services Directive (PSD2) has shown just how the broader financial ecosystem can benefit from APIs –  opening up opportunities to bring new business partners such as fintechs into established financial processes and platforms.

Adressing treasury headaches

Treasury is complex but treasury technology does not need to be dauntingly difficult – APIs provide a cost-effective, frictionless technology experience, they can be plugged in to treasury management systems (TMSs) and enterprise resource planning (ERP) systems as needed, providing greater flexibility, agility and scalability. Fintech providers are at the forefront of developing cloud-based systems that can address many common treasury challenges such as slow implementation times, difficult integrations and repetitive manual tasks. APIs are the core of these innovative offerings.

Among other major benefits of APIs to treasury are the breadth of options they have at their disposal and the reduced friction in payments and reporting systems. Treasurers are no longer tied to systems requiring batch data and direct host-to-host connections to their banks. The speed and ubiquity of APIs mean that payments can be effected in seconds rather than minutes or hours, and information will be real-time, making significant improvements to reporting and decision-making. Managing cash and liquidity across multiple banks is another function greatly simplified by APIs.

A common misconception about APIs is that they are insecure, but in practice companies creating APIs typically use a standardised security framework. A further level of security is provided by the fact that when you use APIs for bank connectivity or any other platform, your data is never fully exposed to the servers. They simply transfer small packets of the relevant information that is requested and deliver only what is necessary to complete the communication.

BNP Paribas is wholeheartedly embracing the open API revolution, and we now have our own developer portal that aims to streamline the discovery of resources including PSD2-compliant APIs. We also have our own API Store where corporates and fintechs can explore some of our live APIs and discover how they could enhance their operations.

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