The Open Banking movement is disrupting the financial services industries in ways not seen since the advent of the internet. While consumer banking tends to get the most attention, financial data’s liberation is also transforming the way companies interact with their bank accounts, and in turn, finances.
Perhaps no one corporate tool will feel this transformation more than the Enterprise Resource Planner (ERP). That said, this radical shift in the way companies will interact with financial isn’t always apparent at first glance. We decided that it was time to help shed some light on the subject. Here are the 11 ways Open Banking will transform ERPs and how companies manage their finances.
1. Aggregating all the company accounts onto one interface
Regardless of their size, companies will have multiple bank accounts across different financial institutions. While the reasons for doing so vary, keeping track of their inflows and outflows is a common problem for the treasury, accounting, and other dependent on that data. Open Banking through regulations like PSD2 enables firms to connect their ERP directly to their bank accounts. Now, users only need to log into their ERP to get all of their account balances in one screen without having to sign into various banking platforms.
2. Providing real-time account information for all accounts
Since the accounts connect directly via API and not through tedious file transfer, financial analysts, accountants, and the treasury can get up-to-the-minute aggregate views on their positions. This access to such real-time information ripples through the firm. Turn around times for decisions drop, allowing businesses to pounce quickly at new opportunities.
Contrast that experience with clicking through multiple banking platforms, copying balances to spreadsheets, and hoping the information is correct. It is immediately clear why the entire business will benefit from Open Banking in the ERP.
3. Streamlining reporting
Account aggregation means treasurers, controllers, and planners don’t need to log into and click around various banking portals to get transaction statements. Instead, this information comes straight to the ERP. Once inside, the user can print or export an entire batch of transfers in their preferred format. Collating various bank statements together into a spreadsheet becomes as obsolete as the typewriter.
4. Accelerating reconciliation
Reconciling accounts is one of the essential functions of the accounting department. Enabling Open Banking in ERPs enables these teams to get a singular view on payments and balances. In turn, account reconciliation becomes less tedious and more accurate, leading to better insights for all who depend on them.
5. Cutting down on costly manual errors
Switching between screens and different banking platforms then inputting payment data is a manual process. Even the most detail-oriented workers are prone to making mistakes, which can be both costly and stress-inducing. Open Banking in ERPs helps minimize input errors by consolidating balances and payment capabilities into one unified platform, giving companies a global overview of all transactions to account for and initiate in a single screen.
6. Making secure payments from inside the ERP
For treasurers and finance departments, Open Banking in the ERP goes far beyond just seeing bank account balances. Thanks to payment initiation capabilities, users can execute secure transactions directly inside their dashboard. Because the relevant market regulators license the Open Banking provider, companies are assured that their transactions are processed securely and to industry standards.
7. Turning liquidity more liquid
The treasury’s ability to manage liquidity goes to another level. No longer do they need to open multiple portals to find balances and execute outbound transfers. Instead, payment functionality comes directly to their ERP, allowing secure execution with a few clicks.
8. Chaining direct payments across accounts in one screen
Users can incorporate Open Banking’s payment initiation to chain multiple direct payments across accounts. For example, an organization might have an invoice due but will need to move funds from various banks to cover it. Suppose the company has enabled Open Banking in the ERP. In that case, the treasurer only needs to access their dashboard, set up the chain, and press ‘execute,’ making cross-bank payments a snap.
9. Making the best use of the best rates
Suppose the transaction chain involves an FX conversion. In that case, the treasurer could route the funds through their bank with the best exchange rate, saving the company on costly conversion fees. The ERP user can also add exchange rate alerts into their dashboard. Here, the treasurer can automate the transaction chain once the FX rate hits a set level, taking advantage of favorable movements with minimal costs.
10. Reacting to opportunities faster than your competitors
In today’s ultra-competitive environment, business agility matters more than ever. Without an accurate understanding of the company’s finances, moving fast and making the right decisions becomes difficult, if not impossible. Open Banking in ERPs removes this roadblock for companies by giving key decision-makers the financial insights and tools they need to strike first when the opportunity arises.
11. Freeing up talent to focus on what they do best
Aggregating multiple operations into a single platform not only makes for better user experience but also eliminates time-draining busy work. With only so many hours in the workday, enabling talent to do what they do best should be a top priority for any firm. Open Banking in ERPs removes countless hours of tedious, manual work for treasurers, CFOs, accountants, division heads, and beyond.
Incorporating Open Banking into the ERP is essential for today’s companies
The Open Banking movement powered by PSD2 and other regulations is changing the ways we interact with finances. While the benefits to consumers are apparent at first glance, we cannot overstate the effects of Open Banking on ERPs. For companies, these transformations will allow them to reinvent and improve their operations, product development, finances, and more. Indeed, the way companies look at managing finances today will very well be a thing of the past while making the essential ERP more functional than ever before.