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Seamless banking for corporates via APIs: Opportunities and challenges

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By Vishal Motwani, Senior Solutions Architect, Swift, India & South Asia

Imagine your digital journey on an online store as a customer. you leverage your Google credentials to log in, browse through products effortlessly across multiple suppliers, add items to your cart, pick a payment method from a host of choices or an Equated Monthly Instalment (EMI) option, and finally track the delivery to your doorsteps. All this orchestration across multiple internal and external microservices is made possible through Application Programming Interfaces (APIs) that ensure a smooth and real time experience. From ordering a humble vada-pav to moving millions across bank accounts from the comfort of your couch, they enable a seamless customer experience. APIs are the unsung heroes of today’s digital age.

In the past decade, the banking industry has stepped up to match its retail customers’ online banking experience to their ecommerce digital experience. More recently, embedded finance partnerships between banks and other digital platforms have been instrumental in further ironing out areas of friction – think about in-app insurance purchase for your cab ride or Buy Now Pay Later options for a small ticket online purchase. Now, the next leg of innovation has started to empower retail customers further through open banking. With the account aggregator framework already laid out by the Reserve Bank of India and Digital Personal Data Protection Act spelling out the rules for usage, processing and storage of personal data, new business models and partnerships will quickly mature.

While the retail customer experience has already undergone a metamorphosis, corporate banking is still on the cusp of a major reform. Until now, corporates have relied on manual processes to communicate with their banks. This has largely been the case since banking instructions are not at the core of corporates’ business. At best, corporates have had to automate processes based on each of their banks’ proprietary, and at times, legacy methodologies.

However, over time, as business volumes continue to grow, there is now an active demand from corporates to digitize their banking experience across payments, cash management and trade finance domains. This demand is driven by the need for standardization, automation, faster processing, and elimination of clunky processes that surround the movement and storage of paper documents.

Large banks have ramped up their investments to solve for their corporate customers’ digital experience. A lot of effort has gone into identifying areas where improvements need to be made. Some have invested deeply to develop dozens of APIs and offer integrated, seamless solutions. But will these efforts be enough to resolve corporate customers’ pain points?

Corporates execute their banking needs through a variety of banks. When every bank develops their own API specifications based on an independent data model and exchanged over siloed channels, the corporate ends up executing disjointed projects for each relationship. Not to mention each bank’s varying identity and security management protocols. And then there is more – each implementation will eventually attract change requests and needs to be maintained. At best, corporates will be able to afford to automate processes only for a couple of their top banks.

The need of the hour is for the banking industry to unite and establish a standardized set of API specifications, identity management methodologies, and connectivity channels. This is the only way corporates can make a compelling business case for automating their banking transactions. The days of proprietary connectivity channels serving as a competitive advantage will eventually fade away. Banks that differentiate themselves through product offerings and customer experience will ultimately dominate the market. It is crucial to recognize the capabilities that require industry-wide collaboration. Getting it right from the outset will propel the industry toward a lasting solution.

The concept of standardised APIs for corporate banking goes beyond convenience; it promises to increase efficiency, reduce operational costs, and enhance security. An industry-wide unified data model and connectivity channel will facilitate smoother interactions between corporations and their banking partners, removing the need for redundant and complex implementation projects.

Furthermore, standardising identity management will strengthen security. Corporations and banks can build trust through standardised authentication and authorisation mechanisms, ensuring that sensitive financial transactions remain protected from cyber threats.

By embracing industry-wide collaboration, banks can focus on innovation and tailor their product offerings to meet the unique needs of their corporate customers. This shift in focus from connectivity to service quality and innovation will determine the success of banks in the corporate banking landscape.

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