What is Host-to-Host bank connectivity?
Host-to-host bank connectivity refers to the communication infrastructure used to establish a connection between your ERP, finance or payroll systems (the host) and the computer systems of a bank or payment processor. This connection allows for the exchange of transaction data between the corporate’s back-office and their bank. Host-to-host bank connectivity can be used for a variety of purposes, such as processing electronic payments, and transmitting transaction data to aide onward reporting and reconciliation.
Why are host-to-host connections difficult to set-up?
One of the main challenges of managing a host-to-host bank connection in-house is the complexity of the technical infrastructure required to build and maintain it. This includes not only the hardware and software needed to establish and maintain the connection, but also the expertise required to configure and troubleshoot the connection as needed.
The security and compliance challenges with host-to-host bank connections
Another challenge of managing a host-to-host bank connection in-house is the need to ensure compliance with various regulations and security standards laid out by the bank. This includes not only ensuring that the connection is secure, but also that all data transmitted through the connection is properly encrypted and that your organizsation is compliant with data privacy laws and regulations.
The ongoing maintenance and support of host-to-host bank connections
Managing a host-to-host bank connection in-house can also be difficult due to the need for ongoing maintenance and support. This includes not only ensuring that the connection is always available and that any issues are quickly resolved, but also the need to plan for and manage any software or hardware upgrades that may be required. This includes changes to payment standards such as ISO 20022 which should make host-to-host connectivity more efficient in the future.
Read more on how to migrate to ISO 20022 here
The argument for managing host-to-host connections in-house
The argument for managing host-to-host connections in-house is that it allows for greater control and customization of the network infrastructure. By managing the connections in-house, you can configure and optimize the network to meet specific needs, such as security and performance requirements. Additionally, in-house management allows for more direct troubleshooting and problem resolution, rather than relying on a third-party provider. It also allows for better control over data privacy and security. Overall, managing host-to-host connections in-house can provide more flexibility and security for the organization, providing you have the resources and expertise available.
When to outsource vs when to use a third party
Deciding whether to outsource or use a third party for host-to-host bank connectivity depends on the specific needs of the organization.
If your organization has the necessary resources and expertise to manage the network infrastructure, it may make sense to handle the host-to-host connectivity in-house. This can provide greater control and customization of the network, as well as more direct troubleshooting and problem resolution. In reality, if your organisation is outside of the financial services or banking sector, you are unlikely to have the same level of expertise as a 3rd party specialist for bank connectivity.
On the other hand, if the organization lacks the resources or expertise to manage the network infrastructure, it may be more beneficial to outsource or use a third party. It is also a question of time: even if you have the sufficient resources, you’ll need to pull it from other key day-to-day tasks. With a typical project lasting 6-18 months, this can have a negative impact on the business. The relationship with your bank’s connectivity department is also a challenge that many businesses underestimate. Managing the project in-house can be significantly delayed by the bank. A 3rd party provider has the advantage of having a strong working relationship with major banks and can fast-track the process.
Outsourcing can provide access to specialized expertise and resources, as well as a higher level of security and compliance. Additionally, outsourcing can free up internal resources, allowing the organization to focus on its core competencies.
Another important factor to consider is cost. Outsourcing or using a third party may be more expensive in the short-term, but it can ultimately save the organization money in the long run by reducing the need for internal resources and expertise
Ultimately, the decision to outsource or use a third party for host-to-host bank connectivity should be based on a thorough assessment of the organization’s needs, resources, and goals.
In summary
Managing a host-to-host bank connection in-house can be challenging due to the complexity of the technical infrastructure required, the need to ensure compliance with various regulations and security standards, and the need to constantly manage ongoing maintenance and support. It’s a complex task that requires a deep understanding of the bank’s systems, networks, and security protocols as well as the capability to monitor and troubleshoot any issues that arise. A reliable and experienced 3rd party service provider will be a better option for most organizations.
Need help setting up one or multiple host-to-host bank connections?
AccessPay already partner with hundreds of organisations and we are trusted by all major banks. We’d love to hear from you if you have a bank connectivity project in the pipeline. Contact us to discuss the options with one of our helpful consultants.
Read more about host-to-host bank connectivity here
