Bank Connectivity for TCSPs

A significant challenge in the TCSP x Banking Partner relationship is connectivity between them. As TCSPs each have many banking partners, a lack of connectivity creates significant inefficiency.

Let’s think about the process for payment input and bookkeeping process:

• At some point the administration system ledger is reconciled against the online bank balance
• The statement is passed to an admin or bookkeeper and input into the administration system
• The following day, a statement is downloaded
• The request is the input in a banking online platform, and again requires approval
• Request needs to be reviewed and approved by a minimum of two people
• Payment request created in an administration system, workflow tool or just a template Word document

Expand that process across hundreds or thousands of entities and their bank accounts.

One of the ways to massively improve this is by creating a secure connection with your banking partner to pass payment instructions and receive statements.

But what are the connection options?

Throw a few Google searches in and you’ll soon see lots of information on Open Banking and PSD2, with providers telling you they connect to over 2k banks. Or you’ll see information on SWIFT and other providers telling you they connect to over 10k banks.

While SWIFT has been around for a long time, Open Banking / PSD2 are the new kids on the block with a lot of hype surrounding them.

So, with all the buzz around Open Banking in the UK and PSD2 in Europe, you might wonder: Is this the answer to our connectivity challenges?

Spoiler alert: not really.

Why Open Banking and PSD2 Aren’t Built for TCSPs

Open Banking and PSD2 were designed with retail and SME banking in mind. They’re great for personal finance apps and small business tools, but here’s why they don’t translate well to the TCSP world:

90-Day Consent Renewal Under both Open Banking and PSD2, consent is required from the account owner for the sharing of data; this consent is refreshed every 90 days. Imagine managing hundreds of client accounts across multiple banks and jurisdictions, and having to refresh consent every 90 days. Operational nightmare? Absolutely!

NOTE: Open Banking now allows for a registered TPP to renew the consent

• Institutional Banking Doesn’t Play by the Same Rules Corporate and institutional banking often uses proprietary protocols, not the standardised APIs mandated by PSD2.
• Coverage Gaps Offshore banks and private banks rarely participate in Open Banking schemes. These frameworks are heavily UK/EU-centric.
• Jurisdictional Reality Offshore jurisdictions typically don’t have Open Banking mandates. Adoption is minimal to non-existent.

Bottom line: Open Banking and PSD2 are great headlines, but not practical solutions for TCSPs.

So, What Are Your Connectivity Options?

1. Direct Bank Connections through Secure File Transfer Protocols (SFTP)

The workhorse of TCSP connectivity. SFTP has been around for an age and provides a secure file-based connection between you and your banking partner.

If you’re using an administration platform or workflow tool to support internal processes, then SFTP can be a great, cost-effective way to introduce automation and efficiency gains around your banking processes.

• Pros: Reliable, widely supported, good for statement downloads and payment file uploads.
• Cons: Manual setup, limited real-time capabilities, and every bank does it slightly differently.

2. SWIFT

The global gold standard for secure, multi-bank connectivity. SWIFT has been available for corporates since 1998 and is heavily used by banks.

With the launch of SWIFT Cloud, costs and technical requirements have plummeted.

• Pros: Standardised, secure, trusted worldwide.
• Cons: Requires a BIC, significant technical expertise, and a healthy budget, making it unrealistic for smaller TCSPs.

3. Emerging Bank APIs

Some banks are starting to offer APIs for institutional clients. This is the big one, the first modernisation of bank connectivity in decades.

Instead of passing files between entities on a daily basis, APIs send individual requests for data. This means less information is flying around, data is provided as and when needed, and it’s very quick. Imagine having real-time balance data at hand whenever you need it!

• Pros: Potential for real-time data and automation.
• Cons: Rare in offshore banking, inconsistent standards, and often bespoke.

Practical Recommendations for TCSPs

• Larger TCSPs: Explore SWIFT if budgets and expertise allow.
• Smaller TCSPs: Stick with SFTP, it’s practical and proven.
• Engage with Banks Early: SFTP is a very real solution for you that does not require significant investment.
• Leverage Technology Providers: Whether this is using Flinq and/or your administration platform directly.
• Plan for Security and Compliance: Encryption, audit trails, and robust processes are non-negotiable.

Final Thoughts

Open Banking and PSD2 might dominate the headlines, but they’re not the silver bullet for TCSPs, especially in offshore environments. Connectivity remains a bespoke challenge, and the smartest approach is pragmatic:

• Use what works today (SFTP)
• Keep an eye on emerging options (APIs)
• And if you’re big enough, SWIFT is still the gold standard

At Flinq, we help TCSPs navigate these complexities and build connectivity strategies that actually work. Want to explore your options?