Host-to-host (H2H) connectivity allows seamless communication and data exchange between different software systems. It’s like having a direct line between your company’s system and your banking partners. For many businesses, H2H connectivity is the key to automating their treasury and financial operations. It enables real-time financial data exchange with banks, simplifying liquidity management, cash flow monitoring, and informed financial decision-making. This efficiency reduces the need for manual tasks and supports the development of scalable financial processes as your business grows.

Historically, H2H connectivity was a feature primarily reserved for large enterprises. However, with technological advancements and the growth of fintech solutions, this connectivity is now within reach for smaller businesses as well. That means scale-ups, small and medium-sized enterprises, and even non-profit organisations can connect to their banks to optimise their financial operations.

How does H2H connectivity work?

System Integration: Your company’s financial systems, like your Enterprise Resource Planning (ERP) software or treasury management systems, get integrated with your bank’s systems. This integration can happen through different methods, like APIs, secure file transfer protocols (FTP/SFTP), or web services.

Establishing connectivity: You create a secure and dedicated connection with your bank’s systems. This connection can be through a virtual private network (VPN) or other secure channels to make sure your data stays confidential and intact.

Data Exchange: Once the connection is established, your financial systems can exchange various types of financial data with the bank, like payment instructions, account balances, transaction details, and account statements. The data can be transmitted in a standardized format, such as ISO20022 or SWIFT, making it easier for both sides to understand, or using a custom format developed by the bank.

Authentication and security: Strong authentication mechanisms ensure the security of the communication. This includes things like digital certificates, secure login credentials, encryption, and other security measures to verify the identity of both your company and the bank.

Transaction processing: Your financial systems generate payment instructions or other financial transactions, which are securely transmitted to the bank through the connection. The bank’s systems receive and process these instructions, carrying out the requested transactions like fund transfers, direct debits, or foreign exchange transactions.

Confirmation and reporting: After processing the transactions, the bank generates confirmation messages or reports that are sent back to your financial systems. These messages provide details about the transaction status, settlement information, and account balances.

What are the benefits of connecting to banks using H2H connectivity?

Direct bank connectivity: One great thing about H2H connectivity is that it can seamlessly integrate with different banking partners. Instead of dealing with multiple banking portals and interfaces, you can consolidate all your banking relationships. That does require an interface to simplify access to the data and make it usable for different tasks that finance and treasury teams would do – balance reporting, cash flow management, paying bills, etc.

Cash visibility and management: Another significant advantage is improved cash visibility and liquidity management. By automating processes like cash pooling and sweeping, you can keep a close eye on your cash position across multiple accounts and locations. This visibility allows for better forecasting and optimization of your liquidity, empowering you to make informed choices about investments, debt management, and working capital allocation. With H2H connectivity, finance teams can proactively manage their cash flows, reducing idle balances and maximizing interest income.

Prerequisite Setups

1)SFTP Connection

2)Recii dll for Visual studio

Transactions Flow

Advantages of Host-to-Host (H2H) Connectivity:

• Quick Onboarding of Customers
• Automation of Payments
• Competitive Edge
• Efficiency and Cost Savings
• Enhanced Customer Experience

Conclusion

Host-to-host (H2H) connectivity in Dynamics 365 finance and operations (D365 F&O) Multi-Bank Connectivity streamlines the exchange of financial data between banks and their corporate clients. Offering secure and reliable connection methods such as SFTP, along with flexible communication patterns like Push/Pull, enables seamless integration and efficient data exchange for financial transactions.
Embracing H2H connectivity empowers organizations to enhance operational efficiency, reduce manual effort, and ensure accurate and timely financial data exchange with banking partners.