ERP Banking must be visible
ERP’s play a crucial role in the success of a corporate company. They allow companies to manage their business through different modules: procurement, manufacturing, warehouse management, supply chain management, customer relationship management, human resources management and other modules. They are, undoubtedly, one of the key technological success factors and allow corporate to run their business more efficiently.
However, there is one module that still needs improvement and doesn’t match corporate expectations and needs: the finance module, more specifically ERP Banking or, as we call it in the Open Finance era, embedded banking.
Corporate needs data that matters
On one hand, to have an impact on society by delivering new products to develop it or support social causes, companies need funds and profits. In order to do that, accurate and online data is essential to make the best decisions.
However, payments and financing information are not. Usually, financial data is outdated when decisions are made and it is, without a doubt, one of the biggest pain points that corporate has. For example, companies don’t have access to real time cash balancing and forecasting, and they encounter many issues in integrating banking data in their flows. For companies that work with several banks, they are struggling by not having all the data in a single view.
ISO 20022, an open global standard for financial information, allows data to be exchanged in a consistent and structured manner which helps corporate and bank to mitigate some of the issues mentioned. However, the technical transformation to be compliant can be complex.
Banks need technological agility
On the other hand, for banks being able to help their corporate customers, they need to have the adequate infrastructure to do so. The good news is that they have invested (and will continue to do it) in developing architectures and systems that can support clients’ technological requests. One example of this investment was the rush for technological architecture revision and development of new ones when the PSD2 regulation was published in Europe.
Also, it is expected that in two years 30% of banks will offer ERP Banking services like automated reconciliation and in six years 50% will have enterprise liquidity management. To deliver these services, banks need to have API-based real-time data and transactional services.
This technological transformation, notwithstanding, is not a finished job and banks, especially incumbent banks, must keep in mind that new architectures need to be agile and breath versality to help corporate clients.
Banks and Corporate can build ERP Banking
If corporate has their needs well identified and banks have the infrastructure to solve them, what is missing?
The first issue is the ISO 20022. Some companies are struggling to be compliant with due to its complexity. To mitigate this, banks need to help their clients implement this standard. With this issue solved, corporate will be able to exchange data more efficiently and banks will have higher satisfaction rates and loyal customers.
The second issue is the complexity of integrating banking data in real-time into the corporate workflows. If it was only one ERP available in the market, the solution would be much easier than it is but there are a lot of ERPs running in corporate’ backend. Additionally, not all the clients need and use the same data so there isn’t only one common integration process. Furthermore, it is complex to guarantee security in real-time data exchange.
Finally, the third issue is the investment that needs to be done. Implementing ERP Banking could be expensive and there are three options that banks must consider:
- Develop an in-house custom solution.
- Partnership with ERP providers.
- Hire a specialized consulting firm with a middleware for all ERP.
The first solution is risky and expensive. As mentioned above, not all corporate clients use the same ERP and building an integration layer in house will need a great effort from a human resources perspective.
The second solution is more secure, less risky, less expensive and will allow to develop a much better integration layer because ERP providers know their system and banks know their data, evidently. The challenge is orchestrating all ERP providers and assure a viable business and time plan.
The third solution can be partnering with a specialized consulting firm, with alliances with major ERP providers that has both technical and business knowledge. In that sense, a company like NTT Data can orchestrate in a middleware all connections between banks and corporates with an agnostic vision regards ERPs. As an example, Platea Banking can support this approach and be an accelerator to adopt ERP Banking.
Yes, ERP Banking is visible
Don’t get me wrong. ERP Banking is always related to Invisible Banking and it is correct to do so. However, the outcomes of embedded banking are visible and represent a key success factor for corporate and banks.
In our experience in NTT Data, a strategic decision needs to be made. Implementing ERP Banking could be challenging and there are three approaches that banks must consider:
- Push data from clients ERP to the banks information systems and provide services to clients.
- Develop a solution, with bank’s services, that clients can integrate in their ERPs.
- Provide services in a marketplace that establishes the connection between banks and corporate.
With ERP Banking, corporate companies will be able to make much better decisions with real time (and accurate) cash balances and forecasts. Their business will undoubtedly run better.
With ERP Banking, banks will have, for one side, their clients more satisfied and with better performances. For other side, they will see a greater transaction flow. Their business will undoubtedly run better.
With ERP Banking, everything will run better.