Streamlining Your Treasury Management Workflow with Embedded Banking

Check out this blog post highlighting the conversation held at Nacha's Smarter, Faster Payments Conference between FISPAN's Co-Founder Clayton Weir and Wells Fargo's Greg Hansen, SVP and Head of Product about streamlining treasury management with embedded banking solutions.

What is Embedded Banking?

Embedded banking is the concept of bringing the bank's products and capabilities into the customer journey earlier. In the world of commercial banking, this means managing your cash management activities, including paying vendor bills, expense reports, and reconciling your accounts within a centralized platform.

Greg Hansen, who leads product for Wells Fargo Gateway, an embedded banking platform and experience, shared his perspective, "It's taking banking or financial services into a non- financial context or app or website or business system, whatever it might be."

For FISPAN, embedded banking means "having the bank show up as a seamless and invisible part of a corporate's operational software tools," said FISPAN Co-Founder Clayton Weir. FISPAN partners with banks like Wells Fargo to help facilitate embedded banking for businesses.

Customers want their bank's products and services, like embedded payments, lending, and insurance, to be a convenient, frictionless experience. In addition, with embedded banking, you can streamline an organization's operations by integrating banking services directly within the business systems and applications they already use. This sufficiently supports and consolidates their workflows.

When asked about the future of embedded banking, Weir shared, "In three to five years, I dream that we won't be talking about embedded banking anymore because it is in the normal adoption cycle of technology. By the time things are relevant in their magnitude of adoption, the words to describe them have gone away. It will just be what we expect from banking."

What is an ERP?

What business systems do corporate users use? They use an enterprise resource planning (ERP) platform, also known as a treasury management system (TMS). 

An ERP platform is a company’s ‘operating system’ used to manage business data, including accounting, procurement, project management, human resources, and supply chain management. 

“Most companies have some form of an ERP system, whether it’s homegrown, cloud-based or on-premise. Essentially this is the hub or operating system for many of the companies we work with,” Hansen explained.

ERP System (1)

Key ERP Insights

  • The global ERP software market size is projected to reach $110.5 billion by 2030, growing at a 9.4% CAGR from 2020-2030, with North America as the dominating region.
  • For midsize companies with less than $1 billion in revenue, the cost of owning an ERP system is approximately 3-5% of annual revenue.
  • In a survey of companies looking to purchase ERP software, 89% identified accounting as the most critical ERP function. The features considered most important were general ledger, accounts receivable, accounts payable, financial reporting and budgeting. 

Evidently, companies have invested very highly in ERP systems and will continue to do so. As banks work to serve their commercial customers and understand their workflows, considering how they use their ERP system is essential. 

ERP Integrations

Bank to ERP integrations have commonly been founded on transmitting data through files. For example, the bank creates a BAI or lockbox file sent to the business, who can then upload and process it through their ERP system. On the reverse side, it could be the user who creates a file within the ERP system, exports and then uploads it to their banking portal. 

Today, businesses use their bank and ERP together in one of the following ways:

  1. Dual Screen: ERP user manages two screens or browser windows, one with their banking portal(s) and the other with their ERP system. The client then has to manually enter transactions twice between the two applications.

  2. Custom integration: Business uses in-house or outsourced IT resources to create a custom integration with their bank. This can be a lengthy and expensive endeavour.

There is a significant opportunity to create embedded banking experiences within ERP platforms that are simple and easy for practitioners. 

"What we're seeing today is the advent of APIs as an alternative to files. APIs allow for a much more simple integration," said Hansen. "It's a very common, modern integration model that allows companies to get real-time data into their ERP and transmit transactions in a real time basis." 

The ERP is what's running your business, and you need the bank's products and capabilities to execute. "The idea of embedded banking is to bring that bank execution from the bank, whether as a file or an API, into the ERP and make it invisible," said Weir.

There are plenty of opportunities to use APIs and different types of data to enhance the procure to pay, order to cash and human resources management experiences within the ERP.

"As we look at these opportunities for embedded banking, we think that there's a better way," said Hansen. "If we can combine the APIs and turnkey Cloud based ERP platforms, partner with a Cloud-based SaaS provider like FISPAN, then we have the opportunity to integrate some of these different services not only more easily, but with much more robustness of functionality for our customers." 

These ERP vendors have the equivalent of an app store with a rich ecosystem of third-party apps that add additional functionality natively within the ERP. "FISPAN believes the bank should be one of those apps," said Weir. "So when the business shows up and installs that bank app, all of a sudden these things the bank does for you now are just a native and seamless part of your normal workflows within that ERP. As opposed to this separate world that you've had to switch between browser tabs to interact with." The best part is that what the bank is doing for you or how it works is less visible to the customer.

"We always talk about how embedded banking is like meeting our customers at the point of need, but a big component to that is making it seamless and invisible enough that you don't even think about the bank," said Hansen. "In this case, going to the bank is removed from the equation, it now happens within the context of the ERP system. I think that FISPAN has done a great job as a partner in helping bridge that gap, and especially on the experience side. How do we make this as seamlessly integrated into the workflow, whether it's checking accounts or your account balances, initiating a payment workflow or managing inbound payments? Making that as seamless as possible within that ERP experience."

To learn more about how FISPAN can support your business or bank with embedded banking, schedule a demo with us here.

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