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Payment Management Methods: How APIs are Advancing Payment Operations

Written by Keegan Chamberlin
February 25, 2022

The payments space has long been convoluted and saturated. Many payment providers specialize in different industries, company size, features and functions, and more. Knowing whether your organization is investing in the right platform and technology for your business’s needs can be difficult and time-consuming. When considering optimizing your payment processes, there are various approaches your organization can take, so understanding the positives and negatives can help your organization make the right choice.

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The Traditional Approach to Payments

Many organizations still track and process their payments directly through their banking institutions. If they have multiple accounts, this involves logging into each bank portal, keeping a manual log of upcoming payments in spreadsheets, and ensuring they have the funds necessary to pay their vendors on time.

The positives of manually handling payments are the cost savings and control over payment processes. You don’t have to worry about paying additional third-party intermediary fees on top of your bank institutions’ standard fees. This may be a satisfactory solution for some small businesses, but handling payments manually can become a daunting and tedious undertaking as these businesses scale. 

As your business continues to scale and grow, so does your payment volume. A task that previously took you a few hours a week to complete may now take 20-30+ hours a week. You may even be tempted to hire someone just to handle this influx in payments. This is where the negatives of handling payments manually set in. 

Not only is manually managing payments by hand time-consuming, but it can also lead to increased human error. What if someone on your team misses a payment? Vendors may not trust your organization to deliver payments on time, and you could incur late fees. What if you miss entering a few payments into your ERP or spreadsheet? You may find yourself in situations where you must borrow a same-day loan from the bank with high-interest rates to submit your payments on time. The traditional, by-hand method becomes a larger headache as your organization grows.


Positives:

  • No additional fees on top of standard charges from institutions
  • More control over your organization’s payment processes


Negatives:

  • As payment volume increases, processing becomes time-consuming
  • Potential to miss payments or pay late due to human error


Billing Automation and Streamlining Platforms

Another option for handling your payments is through billing automation and streamlining platforms. These platforms promise to automate payments by providing a self-service portal for vendors, which is then reflected within the platform. This means that payments do not have to be manually entered into the system for processing, saving valuable time to accomplish other strategic objectives. These platforms also help improve cash flow and easily identify patterns within your data through machine learning algorithms, helping you make more informed, data-driven decisions. 

The problem with many of these platforms is that the companies behind them temporarily hold these payments and process them on behalf of your organization. And while that level of outsourcing can be quite beneficial, it can lead to many additional costs on top of the standard fees your banking institutions already charge you. These platforms charge you an added SaaS subscription and additional payment processing fees. Comparing these billing automation platforms on Investopedia, many cost at least $600 a month for the base SaaS subscription plus revenue overage rates ranging from 0.5%-0.9%. There has to be a technology solution that balances affordability with automation, right? 


Positives:

  • Automates AR/AP collection and processing, reducing time spent on tedious tasks
  • Increases security by providing a paper trail of historical payments


Negatives:

  • Charges both SaaS subscription fees and revenue overage rates on top of your standard bank fees
  • Multiple hidden fees with feature add-ons


Processing Payments with Open Banking API Technology

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With the introduction of Open Banking APIs that support payments, you don’t have to sacrifice automation technology due to expensive third-party intermediary fees. Open Banking APIs establish real-time payment rails between your banking institutions and your cash management platform, empowering you to initiate and send payment and beneficiary information directly to your banking institution. This way, the payment request is created within the cash management platform, but the payment processing is done directly at the bank – effectively eliminating the need for a third-party intermediary to process payments and take a cut. 

This payment approach enables you access to the automation benefits that billing automation and streamlining platforms provide. Instead of paying large third-party fees or processing payments in multiple bank portals, you can track and initiate payments via ACH, wire, and RTP in one secure cash management platform. 


Positives:

  • Features the automation benefits billing automation and streamlining platforms provide without the added third-party processing fees
  • Make more informed decisions based on historic payment information and machine learning algorithms that provide rich insights
  • Initiate instantaneous real-time payments with instant settlement and fund availability


Negatives:

  • Not all banking institutions have opened up API technology for payments


Send and Track Payments in One Platform with Trovata’s Open Banking Payments Experience

Trovata’s Payment App empowers treasurers and finance professionals to make transfers and initiate payments via ACH, wire, and RTP using the bank APIs directly, eliminating the need for a third-party intermediary and additional fees. With payment workflows and templates, users are empowered to implement governance directly within their instance, ensuring all payments adhere to the company’s signature authority matrix, treasury policy, and internal controls. The payments dashboard amplifies a company’s ability to track payments from supported banks in one secure platform. 

Learn how you can send and track all your payments in one secure platform for no added cost as a Trovata client with your J.P. Morgan, Wells Fargo, Silicon Valley Bank, and Bank of America accounts by requesting a demo today.

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