All businesses rely on bank connectivity to handle payments. Many organizations even have multiple banking partners, meaning that they need to use a variety of bank communication channels in their daily processes. Although bank connectivity is of great importance, a considerable number of companies still have manual processes for communicating, uploading, and downloading data across multiple banking platforms. Managed multi-bank connectivity services can reduce the workload for your IT department by helping with establishing connections to your banks and integrating with your existing ERP(s) and other systems thus, enabling the treasury and finance teams to take new solutions into use faster. Using a provider for bank connectivity can save you time and resources through efficient, automated, managed global bank connections.
IT challenges with bank connectivity
The IT department plays a big part in establishing bank connections so that the financial and treasury systems can communicate directly with the banks. There are different methods for setting up bank connections, and what is the best option varies depending on, for example, the bank and the volume of payments. However, it is common for companies to use more than one method for creating the connections, leading to the IT department handling a variance of connectivity types with different banks.
One commonly used method for bank connectivity is SWIFT Alliance Lite2. This type of connectivity via the SWIFT network requires your IT to have SWIFT domain experience and manage the connection points. Also, establishing and maintaining the connections is a complex and error-prone process that requires a significant amount of work. That is also the case with the other connectivity methods. The connections need to be maintained continuously by the IT team, and whenever changes occur from the bank's end, you need to adapt to these. As a result, bank connectivity can easily result in a high workload.
The different options to connect to your banks
The three main ways to connect to your banks are via direct host-to-host connections, local connections, and SWIFT.
Host-to-host connectivity means that direct connections are set up with each of the banks you are working with. In some cases, host-to-host connections must be set up for each country where the company is operating. However, many banks can provide a single point of entry connectivity, meaning that the connection enables operations for cash management messages in multiple countries where the bank has branches.
With host-to-host connectivity, the bank oversees technical requirements. Therefore, you need to adapt whenever the banks make changes. The host-to-host connections require ongoing maintenance and technical expertise from your IT department. If you don’t need that many bank connections, it can be a secure and reliable option. If you on the other hand use a wide array of banks, you might want to outsource the connections to get help with the complex technical work of setting up and maintaining connections with the different banks.
Local connections through regional standard protocols make it possible to connect with all banks in a specific region through standardized, secure, and harmonized infrastructure. One example of a standard is the EBICS (Electronic Banking Internet Communication Standard), a standard for electronic data transactions between corporations, banks, and other financial institutes. It is a mandatory standard in Germany, and also used in Austria, Switzerland, and France.
The challenge with these types of connections is that different countries are using different versions of, for example, the EBICS. Even though EBICS 3.0 was launched in 2018 as an initiative to harmonize the differences, some countries are still using older versions.
Connections through SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a single channel solution that enables you to connect with more than 10 800 financial institutions worldwide. It is both highly secure and reliable and enables you to change banking partners without having to establish new connections.
On the other hand, SWIFT is rather costly, and the integration is both time-and resource-demanding. An alternative when using the SWIFT network is to access it through a service bureau or a ready-made integration in a certified third-party system.
P27 Nordic payments: communication directly with the banks and new payment file formats
Bank connectivity is an important part of all businesses, and especially in the Nordics, it is now highly relevant to oversee bank connections because of the P27 Nordic Payments initiative and the changes it brings. P27 Nordic Payments will simplify payments and make payments more secure in the Nordics. However, you need to make sure that you are ready for the changes and ensure P27 compliance.
P27 will replace clearinghouses such as Bankgirot and the communication will happen directly between businesses and the banks. Old file formats will be replaced with new payment file formats according to ISO20022 XML standards. Therefore, you need to make sure that you establish connections to each of the banks you work with and that your ERP(s) can handle the new file formats. To make the transition easier and avoid a complex ERP project, you could investigate outsourcing your bank connections. With bank connectivity as a service, bank connections and file format conversion are established and managed by the service provider.
Outsourcing bank connections
Automate the management of your bank and ERP connections, conversions, and format changes with help from a bank connectivity service provider.
More efficient process
With a bank connectivity solution, communication with your banks becomes easier as all approved payments transfer to the banks automatically. Whenever the bank makes changes, the service provider maintains the connections and updates them accordingly. The solution enables you to get rid of manual routines and maintenance, and both your IT and Treasury departments can spend their time on more value-adding work.
The best managed multi-bank connectivity solutions
1. Nomentia Bank Connectivity as a Service
Nomentia Bank Connectivity as a Service offers a secure and flexible way to connect with over 10 800 banks and financial institutions worldwide via SWIFT, host-to-host, and regional connectivity. You can connect securely to the Nomentia cloud service that provides a scalable and flexible turnkey solution for reaching nearly any bank in the world. In that way, you do not need to establish and manage connections to your different banks. Everything is handled by Nomentia, with zero maintenance required on your part. You can easily integrate your existing TMS, ERP, or other systems to the centralized hub, which collects files from your systems and automatically converts them into the banks' required formats.
This short video explains the basics of Nomentia Bank Connectivity as a Service:
2. SAP Multi-bank Connectivity
SAP Multi-Bank Connectivity is a platform that securely integrates financial institutions and service providers with corporate customers to exchange financial messages, such as payments and account statements. The connections are managed by SAP via one single channel. Thanks to a partnership with SWIFT, SAP offer embedded SWIFT integration. The solution includes the option to connect with a large number of banks via standard exchange protocols based on EBICS and host-to-host connections. The platform has built-in integration with SAP ERP and SAP S/4HANA. The solution is cloud-based and available as SaaS, enabling you to access it from any web browser.
3. Kyriba Connectivity
Kyriba integrates financial business and systems, such as banks and ERPs, through automated SaaS connectivity in the cloud. Kyriba offers connections to over 1000 banks globally and is SWIFT certified for cash management, including multiple options to access SWIFT, other regional networks, and direct connectivity. You can choose between ERP-initiated payments blind-routed directly to the bank or dynamically routed payments with Kyriba adding further approvals, payments screening, and bank format transformations. The solution also includes options to connect through MT Concentrator, SWIFT Alliance Lite2, SWIFT Service Bureau, regional and country protocols, and host-to-host connections.
4. Reval Bank Connectivity
Reval’s Bank Connectivity service offers automated bank connections for large and mid-sized companies. Reval helps you connect to your banks, monitor connections, and troubleshoot any issues. The service ensures that your bank statements are collected and that payments are processed securely and on time. Reval’s agreement with SWIFT enables you to join SWIFT’s messaging network to connect to banks through the Reval Cloud Platform.
Developing your bank connectivity strategy together
IT plays a big role, not only when it comes to bank connectivity but also in overall cash and treasury management. Therefore, IT and Treasury must work together to develop processes like your bank connectivity strategy. To decide on a suitable strategy, you should begin by investigating whether you can handle your bank connections internally or if you would benefit from using an external partner. To learn more about bank connectivity, take a look at our ultimate guide to bank connectivity.