What is multi-banking payment solution? The unified treasury approach

Operating as a cross-border business presents numerous financial and regulatory challenges. Establishing operations in a new country involves obtaining licenses, opening bank accounts, and navigating complex Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, in addition to stress-testing banking relationships to ensure liquidity resilience. Moreover, maintaining multiple banking relationships can reduce efficiency and increase costs.

This article explores the benefits of transitioning from managing multiple banking relationships to adopting a unified treasury system for multi-banking. Such a multi-banking system offers treasury managers and CFOs a strategic advantage, streamlining operations and enhancing financial management through improved cash management.

Multi-banking refers to the ability to manage multiple bank accounts from different financial institutions in one place. This feature allows users to view all their bank accounts, including personal and business accounts, in a single interface, providing a comprehensive view of their financial situation. The benefits of multi-banking include increased convenience, improved financial management, and enhanced cash visibility. By consolidating all bank accounts in one place, users can easily track their account balances, manage multiple bank integrations, and make informed financial decisions.

Multi-banking works by connecting multiple bank accounts from different financial institutions to a single platform or system. This can be achieved through various connectivity options, such as APIs, host-to-host connections, or SWIFT. Once connected, the system can pull data from each bank account, providing a unified view of all accounts. Users can then manage their multiple bank accounts, including foreign currency accounts, from a single interface, making it easier to track cash positions, manage treasury operations, and make payments.

When a business expands into a new country, it often requires a bank account to conduct financial operations and conduct business. In reality, this means that every international expansion involves adding new accounts that must be managed separately. Consequently, there is little visibility into accurate cash flow and cash positions, and a lot of manual work is required to consolidate the data. Besides manual treasury management resulting from multiple banking relationships, global businesses must comply with diverse compliance and regulatory requirements in every country and pay new account fees. Additionally, managing these complexities often involves establishing and maintaining multiple bank connections, which can be resource-intensive and challenging.

Compliance and regulatory challenges

In international markets, businesses and corporate customers have to grapple with diverse and ever-changing regulatory requirements that are hard to keep up with and have to undergo a KYC/AML process each time they onboard with a new financial institution. If you do not keep up with changes to requirements, you may lose not only your reputation but also your ability to operate in that country. Additionally, integrating bank data from multiple banks is crucial for ensuring regulatory compliance and achieving comprehensive cash flow visibility.

Fees

The banking fees associated with banking are not a surprise to anyone, and most financial institutions are upfront about them. Monitoring account balances and payment statuses is crucial to avoid unexpected fees and ensure smooth financial operations. Some fees, however, are not so obvious and may accumulate with multiple financial institutions and severely hamper your ability to conduct business.

Monthly maintenance fees - these are usually waived when opening up multiple accounts with the same institution but a business needs to satisfy minimum monetary requirements to keep the fees down.

Transaction fees and bank transfer fees

Insufficient funds fee- This is different from overdraft and some financial institutions can penalise you for not having sufficient funds in your account which can be extremely risky when dealing with multiple accounts.

Required minimums - The minimum amount required to open and operate a business account**.** If you fail to meet the minimum requirements, you can get fined and banned from accessing your account, which disrupts your business operations.

Credit score and lending eligibility impact

The opening of multiple bank accounts with multiple banks won’t negatively affect your credit score, but accessing new credit lines will, since each requires a hard credit check. Additionally, lenders will not be impressed by a lack of visibility over funds or a lack of diversification. The sheer number of financial institutions you have to deal with can seriously tank your loan eligibility and your ability to grow your business. Maintaining visibility across all their banks is crucial for managing funds, avoiding fees, and ensuring timely payment execution, which ultimately impacts your creditworthiness.

The decentralized nature of global financial operations and multiple banking systems are commonly solved by spreadsheets. Manually aggregating and entering data is time-consuming and error-prone, which only adds to the problem rather than solves it. The Unified Treasury Systems, also known as TMS (Treasury Management Systems), is a technologically suited solution for managing global financial operations and multiple financial institutions. This centralized platform enables substantial cost and operational efficiencies by consolidating all your accounts and banking connections into one place through multi-bank connectivity.

Streamlined Compliance and Commercial Relationships

The implementation of a unified treasury management system simplifies the compliance and commercial banking processes required for onboarding and maintaining relationships with new financial institutions. With a streamlined approach, companies can enter new markets faster, reduce governance and compliance risks in new countries, remain agile in responding to market trends, and develop strong relationships with their suppliers. Additionally, managing multiple bank integrations is crucial for facilitating fund management and addressing the technical challenges involved. Integrating these processes with an ERP system can further enhance control, efficiency, and transparency in treasury operations.

Time & money savings

The time and costs associated with managing multiple banking relationships are significantly reduced when a multi-bank system is implemented and banking is centralized. Having one bank ready to go live while preparing another in advance ensures operational continuity and safeguards customer deposits. Firstly, it eliminates the risk of accumulating fines and fees from multiple providers. The second benefit is that it removes the costs associated with correspondent banking. In practice, this means faster and more efficient payments, which not only make it easier for businesses to access capital and maintain relationships with customers and suppliers in the ever-changing global market. The efficiency gained translates into tangible cost savings and improved operational effectiveness.

Optimised Working Capital and Liquidity

Having real-time access to data consolidated from various banks, across all global operations, allows Treasury managers to focus on strategic tasks like liquidity management, forecasting, and liquidity diversification. Optimizing working capital and reducing risk ultimately increases the company’s loan eligibility. Open banking enables multi-banking solutions that allow consumers to view and manage multiple bank accounts from different institutions in one place, enhancing visibility and understanding of personal finances.

Improved Credit Scores

Through a unified treasury, you can manage and mitigate financial risks more proactive and positively impact your credit score. With better financial health and higher eligibility for loans, the business is more likely to grow. Additionally, a unified treasury allows businesses to manage all their finances from different accounts in one place, providing a comprehensive view of their financial situation.

The Fyorin solution addresses compliance, cost, and efficiency challenges related to managing global financial operations with multiple banks and financial institutions.

By refining and simplifying treasury operations, our platform allows CFOs and Treasury Managers to efficiently manage their financial operations on a global scale, reduce liquidity risk, and cut costs.

Our company isn’t a bank, but rather a technology provider that gives you access to 100+ currencies through our extensive network of compliant, global financial institutions, so that you can hold, receive, send, and exchange funds with multiple institutions as easily as you would with one. Your funds are safe with the underlying provider, so you can reduce liquidity risk easily and get real-time visibility into your funds, across all currencies and institutions.