Streamlining Bank Transactions: Bank API Integration for Faster Statement Processing

Introduction

In today’s digital era, businesses need efficient, streamlined processes to stay ahead of the competition. One area where this is particularly important is in cash application processes. Traditionally, businesses would receive payment information from banks daily in standard file formats like BAI2 and MT940. However, with the rise of API integration, businesses can now receive real-time payment information from banks, making cash application processes more efficient and accurate.

In this blog post, we’ll explore the benefits of API integration for extracting payment information from banks, how HighRadius is implementing bank API integration for A/R teams, and how bank API integration works to reduce the time required in the cash application process.

What are APIs?

Having strong communication is crucial for successful collaboration, healthy relationships, and thriving teams. This principle also holds true for technology. APIs, which stand for Application Programming Interfaces, allow two different software applications to communicate with each other. This empowers businesses to construct solutions using established definitions and protocols, enabling safe connectivity, driving revenue, and providing improved customer service.

In banking, APIs enable businesses to extract information from their bank accounts in real time, providing accurate, up-to-date information on their financial transactions. In addition to cash application processes, Bank APIs enable businesses to access banking services such as making payments, checking account balances, and initiating transactions from their software application.

The 4 Benefits of Bank API Integration:

The use of bank APIs comes with several benefits for businesses, including:

1. Real-time information: This allows businesses to receive real-time payment information from banks, enabling them to process payments quickly and accurately.
2. Reduced costs: Eliminates the need for expensive file transfers and reduces the amount of time and money spent on manual processes.
3. One-time setup: With Bank API integration, businesses only need to set up their connection to the bank once, making future integrations with new clients much easier.
4. Enhanced security: Bank APIs use secure authentication protocols to ensure that financial data is protected from unauthorized access.

Understanding Open Banking APIs:

Open banking APIs are a type of bank API that allows third-party developers to access a customer’s financial information through a secure channel. It gives customers the ability to share their banking data with trusted third-party providers with their consent. This enables businesses to create innovative financial products and services that meet the unique needs of their customers.

Examples of Open Banking API Use Cases:

One of the most significant advantages of open banking APIs is the ability to create innovative financial products and services. Some examples include: 

• Budgeting and personal finance management applications:

1. Utilize open banking APIs to access customers’ bank account data.
2. Categorize customers’ spending and provide budgeting advice.

• Invoice financing:

1. Leverages open banking APIs to verify invoices and the customer’s creditworthiness.
2. Allows businesses to receive payment for their invoices before the due date.

HighRadius utilizes open banking APIs to gather financial data from banks securely and efficiently. With open banking APIs, HighRadius can access a customer’s financial information with their consent, enabling businesses to create financial products and services that meet the unique needs of their customers.

Key Differences Between API Banking and Open Banking:

API banking and open banking are two distinct concepts. API banking focuses on accessing banking functionality through APIs, while open banking APIs are designed to provide access to user data. Open banking is a heavily regulated framework that serves as the foundation for Banking as a Service (BaaS) using API banking.

API banking enables banks to integrate with financial services, resulting in innovative outcomes that enhance the user experience. Meanwhile, open banking APIs promote financial transparency, thereby promoting fintech growth. Once API-enabled banks are onboarded onto the platform, companies only need to refer to a centralized source, thereby reducing risks.

HighRadius utilizes both API banking and open banking to streamline cash application for businesses. With API banking, HighRadius accesses banking functionality to reconcile incoming payments automatically, reducing manual intervention and improving cash flow. Open banking APIs securely connect with banks and financial institutions to obtain transaction data, providing businesses with a 360-degree view of their accounts receivable and cash positions in real-time. By combining these benefits, HighRadius offers businesses a comprehensive and efficient cash management solution that streamlines cash application and improves overall cash flow.

Bank API Integration with HighRadius

HighRadius Cash Application Cloud is a powerful tool that provides accounts receivable (A/R) teams with better control and visibility over customers’ payment information and account-related data. By leveraging bank APIs, this solution considerably reduces the time involved in the cash application process, enabling A/R teams to streamline cash application workflows and focus on more strategic activities.HighRadius integrates with various types of bank APIs to ensure seamless and secure integration with your banking systems. Some of the APIs that HighRadius integrates with include:

1. Current Day API: With this API, your cash application teams can request intraday payment data. This API deals with transactions from the start of the day until the time of the API call/request. This enables your teams to have real-time visibility into payment information, which can help them make more informed decisions and respond more quickly to any issues or inquiries.
2. Previous Day API: This API is equivalent to end-of-the-day files where all transactions are from the previous day, consisting of transactions from the start of the day until the end of the day. This API is useful for A/R teams that need to reconcile payments from the previous day.
3. Account Balance APIs: This API is useful for treasury departments to get bank account-level information such as opening and closing balances, etc. With this API, your teams can get real-time visibility into account balances, enabling them to make more informed decisions about cash management.

By integrating with these bank APIs, HighRadius Cash Application Cloud enables your teams to have real-time access to payment and account information. This enables them to streamline workflows and reduce the time involved in the cash application process, ensuring that your organization has better control and visibility over its cash flow.

Simplifying Data Retrieval with HighRadius’ 3-Step Bank API Process:

The process for receiving payment information using bank APIs involves three simple steps:

1. Authorization by the Client: The client must authorize HighRadius to access their payment information using their credentials (client ID, client secret, application name, and provider ID). 
2. Integration with HighRadius: The client’s credentials are then configured in the HighRadius system.
3. API Request and Response: HighRadius then makes API requests to the bank and receives payment information in real-time or at the end of each day, depending on the selected API.

Conclusion

API integration is revolutionizing cash application processes by enabling businesses to receive real-time payment information from banks. With API integration from companies like HighRadius, businesses can streamline their cash application processes, reduce costs, and enhance security. As the use of APIs continues to grow, businesses that adopt this technology will be better equipped to succeed in today’s competitive marketplace.