B2B APIs
Yes That is a Real Thing
Yes, I agree Legos is a tired metaphor for technology but that doesn’t mean it isn’t accurate. In the case of APIs there is just not a better one.
Let’s start with a bit of history, you probably became aware of the term in the last 5 years maybe even 10 years. But according to Wikipedia the term is older than most of you reading this Blog:
“The term “application program interface” (without an -ing suffix) is first recorded in a paper called Data structures and techniques for remote computer graphics presented at an AFIPS conference in 1968.”
Remembering you came here for the B2B Buzz not a deep dive into technology but please bare with me as I am finding it is very important for those of us that look at the “CFO Stack” to have a better tech understanding.
This chart from the folks at McKinsey & Company shows the folks running the bank side of the CFO stack are getting hip to tech driving their decisions.
Notice that the banks surveyed recognize the need to have APIs for Open Banking (PSD2) and Cash Management as well as Trade Finance. The banks know they can no longer count on customers using EDI or other dated technologies to connect their systems.
Notice how Distributed Ledger Technology (aka Blockchain) is far more focused in Trade Finance than Cash Management. Blockchain is an ideal technology for multi-party transactions that require an audit trail, so trade is a great use case.
This quote from the McKinsey report shows the power of a B2B API
“many companies are leveraging cash management APIs to automate invoice reconciliation workflows in their ERP systems.”
I don’t know many CFOs or Treasurers that would not want to automate invoice reconciliation within the ERP infrastructure. This takes far too much time and is an ideal workflow process target for automation.
Let’s click on Visa’s new B2B API set. The following is from Visa’s Developer Center, which if you think about it, is amazing that Visa has a Dev Center and a publicly available sandbox. Not picking on Visa here, but if they have a Dev Center and such, your bank probably should too.
- Commercial Customer A initiates a payment funded from their account at Bank A.
- Bank A (Originating Bank) submits the payment instruction to the Visa B2B Connect Service.
- Bank A funds Visa’s settlement accounts in settlement currency before the close of the settlement window.
- Visa B2B Connect validates the transaction and confirms with the Originating Bank.
- Visa B2B Connect notifies Bank B (Beneficiary Bank) by sending a payment remittance notification.
- Visa B2B Connect delivers payment to Bank B. Note: Beneficiary Bank may use finds as liquidity on the Visa B2B Connect network.
Get Bank from Visa’s dev portal allows the participating bank to retrieve its bank profile information as well as its bank settings. This is a single API for a transaction that gets bank profile information and puts it into the application.
To be clear all of these connections will require your bank to have developers on staff to take advantage of this system and further to the point your systems need to be open-ish. APIs work best with either a SOA (Services Oriented Architecture) system or a Microservices Architecture and many legacy systems are likely to be Monolithic.
JSON is a base technology used in APIs and noted in the above Visa API, don’t worry too much about it but here is Wikipedia’s definition:
“JSON is an open standard file format and data interchange format that uses human-readable text to store and transmit data objects consisting of attribute–value pairs and arrays. It is a common data format with diverse uses in electronic data interchange, including that of web applications with servers.”
There are also new solutions that allow you to “wrap” your legacy systems with an “abstraction layer” allowing your system to have some of the characteristics of a Microservices Architected system.
KEY POINT: Remember the Lego metaphor, that is where APIs fit into a system quickly and easily IF the system is architected for easy insertion or removal. Monolithic systems do not work that way. If you want a quick and easy understanding of architecture and how it impacts your API strategy. I like the free reports from Lean IX https://www.leanix.net/en/
Before you presume that APIs are a silver bullet for all current and future integration issues, two key points.
- Not all APIs are equal and documentation is a key differentiator
- Security is often overlooked, ensure you build your API strategy with security in mind.
All systems that make things easier to access come with inherent security issues. I always use the door window metaphor when talking about ease of access vs security. They are diametrically opposed and you have to decide how you will design for the best of both and the tradeoffs.
As an example everyone has seen Plaid popup on some consumer Fintech or bank site. I was using an Excel add in called Tiller the other day to download all of my bank and investment accounts into an Excel spreadsheet. Works great until it doesn’t. 3 of my accounts require a text based 2-factor authentication every single time, so Tiller won’t work unless I do the auth every time. Once I realized that I uninstalled Tiller and cancelled it.
I hope this quick and easy overview gets you thinking about APIs and how your systems should be built to be future proof using a Microservices Architecture. I realize that as a bank, this is not an easy journey and will be achieved in steps.
The future is bright for banks to be at no disadvantage to Fintechs in regards to technology.
