Transforming Global Transaction Banking With Open APIs

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May 6, 2021
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May 6, 2021
Transforming Global Transaction Banking With Open APIsTransforming Global Transaction Banking With Open APIs

Transaction banking refers to a set of commercial banking products and services offered by a bank, including transfers and payments, cash management, asset management, financing, and global trade services. With transaction banking, business enterprises can improve liquidity management, fund cash requirements appropriately, and make safe international money and securities transactions that comply with global financial frameworks. Consumers of transaction banking services include the public and corporate sectors, multinational companies, government agencies, and financial institutions. 

Transaction banking services are especially critical for larger enterprises in securing timely credit, optimizing cash, and managing liquidity. Traditional banks, mostly large global ones, have been at the forefront of providing global transaction banking (GTB) services for years. In the early years, several of these services remained disparate. However, over the years, investments in technology and digitization have integrated them into a common set of offerings, often on a single, integrated platform. Notwithstanding these investments, transaction banking systems have remained isolated from corporate treasury and ERP systems, leaving behind operational inefficiencies and innovation barriers. Some of the shortcomings are as follows:

  1. Manual payments and account reconciliation between banking systems and corporate ERP systems
  2. Broken user experience due to fragmentation of information across multiple systems for enterprises
  3. High operational costs for banks on account of human relationships and support teams
  4. Aggregation issues within and across banks

Limitations of Traditional Integrations

The traditional approach to integrating banking systems with corporates’ enterprise systems has mostly been bilateral, developed and maintained for specific purposes. The systems were integrated using host-to-host interfaces, legacy web services, and secure file transfer protocols (SFTP). Even though these methods favor payments and aggregation, they are not designed to solve complex problem statements in reconciliation, trade services, collections, and supply chain finance. Moreover, these solutions are non-scalable. The evolution of open APIs is starting to address some of these long-standing issues.

Transaction Banking APIs: A Game Changer

B2B API platforms enable banks to offer GTB services to clients in a discreet manner. They work in closed networks to seamlessly integrate GTB functionalities with enterprise systems and workflows. Apart from banks' digital initiatives, regulations on electronic payments, such as PSD2, and instant payments are fueling the adoption of open APIs in transaction banking.

Some factors driving the adoption of APIs in transaction banking are as follows:

  1. Opportunity to do multi-bank data aggregation and consequently garner a higher share of corporate relationship 
  2. Deeper integration with corporates’ treasury and ERP systems, leading to enhanced operational efficiencies
  3. Improved digital experience 
  4. Increased potential to go digital and scale complex operations such as initiating trade contracts and managing virtual accounts

Examples of Banks Focusing on These API Offerings

Goldman Sachs recently announced the launch of APIs for transaction banking. These services help businesses integrate transaction banking services with their enterprise systems and workflows. According to Hari Moorthy, Global Head of Transaction Business, “We are trying to create a new industry by integrating our services into their businesses so they can cater to their clients as if we had them. Imagine a technology company that can use these APIs to create a solution for payments or deposits in concert with whatever else they currently provide to that client.” According to Mr. Moorthy, this move would enable Goldman to acquire the clientele of its clients.

With this launch, Goldman Sachs aims to modernize and digitize corporate cash management. The company’s transaction banking (TxB) APIs would offer liquidity management products such as deposit accounts, virtual accounts, and cash concentration; escrow accounts; payment services such as ACH and Fedwire; and cross-currency payments.

Goldman Sachs’ TxB APIs are divided into three functional domains:

  1. APIs that enable virtual account creation
  2. Payments origination APIs that facilitate a convenient transfer of funds from one deposit account to another account or bank
  3. Convenient tracking of balances and transactions

In the US, JP Morgan offers Chase APIs for powering businesses. Clients can integrate their digital solutions with the company’s customers. JP Morgan’s API portals help third-party FinTechs highlight suitable data offerings for clients. Citigroup has a robust API suite.

CashPro APIs offered by Bank of America allow clients to connect with businesses beyond traditional banking channels. Accounts API helps clients retrieve account and transaction data of Citi customers who have authorized the clients’ app. A summary of all the accounts will first return basic account information and account IDs. Upon receiving this information, additional account details and/or transactions can be requested. The API can relay information regarding cards, checking, savings, loans, line of credit, and brokerage accounts. Clients can initiate, cancel, and request the status of different payment types in real time with Payment APIs. With the help of Account Information APIs, clients can access balances in real time or view a detailed transaction history (spanning across years). Check Services APIs enable clients to retrieve a range of check images and submit check issues and voids. The Check Image Retrieval service allows clients to obtain images for paid checks within the retention period associated with a check disbursement account.


According to a McKinsey survey, executives are betting on cash management and trade finance to be the growth accelerators for the coming three years. Large players in the banking sector are concentrating on integrating GTB with products that have tremendous growth potential. It is also vital to note that this business generates nearly $1 trillion (estimated for 2018) in global annual revenues for banks.

With the recent buzz around Goldman Sachs’ APIs, the competitive focus has intensified on simplifying traditional and complex transaction banking practices. APIs are making inroads into this domain. Banks’ API offerings are continuously evolving from a payment-centric strategy to a broader transaction banking-based strategy, which would result in a win-win for banks and their corporate clientele.

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