How tech can turbocharge bank connectivity


Read time: 5 mins

 


Treasury teams should consider new ways of exchanging payment and other information with their banks given the compelling speed and efficiency benefits, write Thomas Young and Lewis Anderson, Directors, Global Transaction Solutions at Lloyds Bank International.

Thomas Young

Lewis Anderson

Changes in the payment landscape
 

When retail payments switched from chip and PIN to contactless payments, many people were hesitant, citing security concerns and doubts about convenience. Similar worries arose during the shift from signing for card payments to chip and PIN. However, few would now revert to older technologies, as we all acknowledge these advancements have made our lives a little easier.​

Now, many treasury teams at corporates and financial institutions are on the edge of a similar once-in-a-generation change in how they interact with their bank.​ Currently, many bank clients connect to their provider via an online portal. It’s a key tool that has transformed how treasury operates over the past two decades. But the pandemic highlighted its shortcomings. Making payments typically involves multiple stages and approvals, lengthy manual processes, card readers, and logins. During lockdowns, this protracted process became clunkier.​

​Now, the payments landscape is changing and many client treasury teams want to improve connectivity as part of broader digitalisation initiatives. Host-to-host (H2H) and application programming interfaces (APIs) could be bank connectivity’s chip and PIN/contactless moment. A relatively simple change in connectivity could fast-forward treasury and deliver lasting benefits.​

Man and woman looking at laptop device at an office desk

Why consider H2H & API technology?

 

H2H and API technology offer many similar benefits over online banking. Both deliver a direct connection to a bank, simplifying and speeding up operations and data flows. They also enhance security by eliminating the need for multiple logins and card readers.​

The direct connectivity of H2H and APIs into a client’s enterprise resource planning (ERP) or treasury management systems (TMS) facilitates straight-through processing. Processes that previously took hours can be reduced to minutes by automating manual tasks such as uploading payment files, downloading bank statements or reconciling payments. ​

The higher maintenance costs of H2H and API compared to online banking are more than offset by the savings that result from operational efficiencies and process simplification: treasury staff can be redeployed to value-added tasks rather than having to monitor a bank portal or reconcile payments.​

Example use cases

While H2H and API offer some similar benefits, they use distinct technologies and have potentially different use cases. Indeed, many companies use both connectivity technologies simultaneously – and also retain online banking for business continuity purposes or occasional one-off big-ticket payments where a slower, more deliberate process is helpful.​

H2H is, as the name suggests, a direct data highway between a client and its bank and is especially valuable for bulk payments when real-time delivery is not required. In contrast, APIs (which enable different software applications to seamlessly communicate) are more flexible and better suited to single payments or actions.​

For instance, Lloyds Bank’s H2H service enables an automated end-to-end payment process, with files – detailing any number of individual payments – transferred seamlessly and requiring no manual input. Alternatively, an API might be used to execute a goodwill payment in just a few seconds without requiring finance team authorisation, enhancing customer satisfaction (see box for details of Lloyds Bank API-powered solutions). 

Lloyds Bank API-powered solutions

PayTo:
Make Faster Payments from your system without manual intervention.

PayFrom Bank:
Your customers can pay you via Faster Payments.

PayMe:
Make a one-off payment where you don’t know the beneficiary’s account details.

FundBy Bank:
Your customers can fund their accounts held with you via Faster Payments.

Confirmation of Payee:
Verify the bank details of customers or suppliers.

Reporting solutions:
Instant notification of account movements.

 

Safety is paramount

Whether a client connects to Lloyds Bank via online banking, H2H, or APIs, they always benefit from the same robust bank-level cloud security and multi-layered fraud detection. However, different types of access follow varying protocols. Login and payment approvals for Lloyds Bank’s web-based portal require two-factor authentication (username and password), with additional approval via card reader. Users are assigned entitlements for specific services, such as accounts, payment types, limits or services. Dual administration (maker-checker) is mandatory for entitlement actions, with flexibility to meet clients’ needs. Tools are available to detect suspicious activity, and all events (including payments) are signed and recorded in an accessible audit log.​

Setup and security

​H2H does not require maker-checker controls, allowing clients to implement their own internal controls, based on payment size or beneficiary. H2H enables file transfers directly from desktop, TMS or ERP systems and utilises bank-grade security and protocols to protect access and data, including file- and transaction-level signing. APIs use digital certificates to safeguard the connection between the client and Lloyds Bank as well as the data contained in the message.​

​Setting up online banking (including delivery of card readers) or H2H takes about six weeks, while API implementation is faster and simpler.



 

Support on your journey

Lloyds Banks has an omni-channel approach to connectivity and provides comprehensive implementation and day-to-day support regardless of whether a client uses online banking, H2H or API. “We recognise that each client is at a different stage in their technology and connectivity journey – for historical and bank-relationship reasons those in the Crown Dependencies tend to lag onshore clients – and we’re ready to help as their needs change,” says Thomas Young, Director, Global Transaction Solutions at Lloyds Bank International.

To establish the potential benefits of moving to H2H or API, Lloyds Bank takes a consultative approach. 

 

“We sit down with treasury to understand their existing payment processes and pain points. Our goal is to help clients discern the potential of these technologies and identify the solutions that will deliver for them. In almost all cases, we find that H2H and API offer compelling solutions for clients’ challenges: our implementations to date have surpassed clients’ expectations in terms of benefits.” 

Lewis Anderson, Director, Global Transaction Solutions, at Lloyds Bank International. 



Lloyds Bank believes that H2H and API are the next stage in the evolution of payments. Just like chip and PIN or contactless, once clients experience them, they won’t want to go back.

Lloyds Bank Gem® is a registered trademark of Lloyds Bank plc. Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.

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Streamline and speed up your payment processes

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