Treasury Connectivity – what a treasurer should know

Introduction

Treasurers, CFOs and CIOs are increasingly turning their attention to the integration of connectivity and APIs within their financial operations. As these roles seek to enhance operational efficiency and real-time data access, understanding the key considerations before embarking on this technology journey is crucial.

This article will delve into what financial leaders need to assess in terms of security, compatibility, scalability, and cost-effectiveness to ensure a successful digital transformation.

Banks Connectivity Channels

The first thing a treasurer should consider is the organisation’s current banking footprint. This includes the number of banks and bank accounts that the organisation has.

For example, if the organisation only banks with local South African banks, Host-to-Host connectivity might be the best solution as it is easy to set up and cost-effective.

However, if the organisation is part of a multinational group with various banks and accounts, it might be better to opt for SWIFT. SWIFT is a global provider of secure financial messaging services that allow for seamless communication between banks and other financial institutions.

To gain full visibility and automation of all accounts within the organisation, including credit and fleet cards, money market accounts, and certain account types that banks cannot distribute using the above channels, Robotic Process Automation (RPA) software can be used. RPA software can convert PDF or Excel files received from the banks via email into a system-readable electronic format.

This can significantly streamline the reconciliation process and reduce errors.

TreasuryONE recommends a hybrid of the above-mentioned connectivity channels to get the optimal fee structure for a connectivity solution.

This allows for flexibility and the ability to choose the most cost-effective option for each individual bank account.

Internal Systems Connectivity Channels

The second thing a treasurer should consider is the organisation’s internal systems and their connectivity channels. It’s important to understand the current and future technology landscape, including the Enterprise Resource Planning (ERP) system.

This can help determine which connectivity channels are supported, such as Application Programming Interface (API) or Secure File Transfer Protocol (SFTP). It’s also important to identify any development requirements on file formats and API messaging to ensure that the connectivity channels are compatible with the organization’s internal systems.

IT Resources

The third thing a treasurer should consider is the IT resources required to manage the various connectivity channels. This includes development resources to create custom interfaces and the necessary skills to manage and maintain the connections.

The treasurer should work closely with the IT team to ensure that they have the necessary resources and support to manage the connectivity channels effectively.

Misconceptions

One of the most common misconceptions in treasury management is that one file format can work across all banks. This is not the case, and file formats need to be custom-developed and tested per bank and often per bank country branch.

Electronic statement files can also often not be generated and sent by some banks for certain account types such as Call accounts, Credit card accounts, Investment accounts, etc.

Another misconception is that one connectivity solution fits all.

This is not the case, and each company’s connectivity scenario needs to be carefully considered depending on the banking footprint.

For example, some banks might not have the functionality required. Therefore a hybrid solution for connectivity is usually the best approach for most large corporates, especially those with a large global banking footprint.

By using a hybrid solution, the company can choose the most cost-effective option for each individual bank account.

It’s also a common misconception that once a connectivity channel is set up, it doesn’t require any further maintenance. In reality, connectivity channels require ongoing maintenance to ensure that they work effectively and efficiently.

This includes testing and troubleshooting, as well as updating and modifying the connectivity channels as needed.

Finally, some treasurers may believe that automating the reconciliation process through connectivity channels will eliminate errors completely.

While automation can significantly reduce errors, it’s important to recognise that errors can still occur. It’s essential to have a process in place to identify and correct errors as quickly as possible to minimise any negative impact on the organisation.