Account balances reflect the funds available in a company’s bank accounts. Needless to say, this is critical information for any company. It might be even more critical for fintech companies moving money as their core business. Does a payment company have the right amount of money on the proper accounts to send customers’ payments at any time? Does a lending company have enough cash available to extend loans today?

However, the majority of banks do not offer real-time balance updates, which may suffice for various industries but falls short for many fintech companies.

Most banks usually provide two types of balances to their customers: prior-day balances, generated at midnight or shortly after, and intra-day balances, generated every few hours.

Most banks make both intra-day and prior-day balances available to customers because intra-day balances contain information that might not be final. Indeed, a debit transaction, for instance, might correspond to a payment made from the bank account to an external beneficiary that has been accepted by the bank but has yet to be sent to the clearing and settlement mechanism (CSM). This payment can be blocked at the CSM level for technical reasons or rejected by the beneficiary bank for various reasons. Therefore, the corresponding transaction might appear in the intra-day report, and the intra-day balance might reflect this transaction. Still, if something goes wrong, the intra-day report might not represent the reality of the bank account at the end of the day.

Intra-day and prior-day are great starting points for getting visibility on your bank accounts and your available funds, with a relative level of certainty depending on the type of balance. But as discussed in our introduction, some companies might need real-time balances for operational purposes, even if these real-time balances aren’t 100% accurate from an accounting – or actual cash availability – perspective. To make it through the day in terms of operations, companies sending and receiving hundreds of thousands or millions of payments daily will need a view of the order of magnitude of cash available on their accounts at all times, not a view down to the last penny.

Luckily for fintech companies, banks make much more information than intra-day and prior-day balances available to their customers. And they can use this information to calculate pending balances in real time.

For instance, banks generate bank-to-customer debit and credit notifications. They contain transaction data every time a debit or credit is booked on the account and are often generated every few minutes. Banks also make payment status reports (PSRs) available to their customers. They indicate if and how the bank has processed payments and therefore give a first level of confidence on the first steps of outgoing payments. Fintech companies can leverage this information to calculate pending or provisional balances from the bank's last intra-day or prior-day balances.

Take the following simplified example: a payment company’s latest intraday balance indicates €10,000 available on its settlement account at 11:00am. Since 11:00am, the company has sent its bank one payment order for a €1,000 SEPA credit transfer and one payment order for a €500 SEPA credit transfer. The PSRs for both payments indicate the status ACCP, which means that both payments have passed technical and functional validations from the bank. The fintech company can assume that there is a good probability these payments will be successful and account for them in their real-time pending balance, leading to a new balance of €10,000 (€1,000 - €500 = €8,500).

This is, of course, an extremely simplified example. Mature fintech companies will combine these calculated balances with liquidity forecasts based on payments seasonality, customer activity and market events to ensure they always have the right amount of funds in their accounts.

We now understand how fintech companies can leverage bank information to get real-time visibility on their balances, in theory. Indeed, to leverage this data, fintech companies must first collect it from the banks’ systems.

Most tier 1 banks packaged intra-day and prior-day balances, as well as PSR and all the other information they make available to their customers, into XML files uploaded on SFTP servers.

To leverage this data in real-time, fintech companies must build systems that will automatically collect these from the banks’ servers as soon as available, which isn’t an easy task.

Fetching these files is only the first part of the job, as most fintech companies’ internal systems won’t have the native capabilities to ingest and process XML files. To achieve real-time visibility on their balances, fintech companies must therefore build systems that will read the files and extract the right information from them, but also make them available via APIs, webhooks, or any connectivity channel that is easy to integrate with the fintech company’s existing technology stack.

Only then, when all the necessary information can be automatically and immediately transferred to the fintech company’s systems can it build the logic to calculate pending balances according to its business needs.

While automatically having access to bank accounts information in real-time and being able to leverage it in your internal systems is powerful, it can represent a significant product and engineering project to so.

Mambu Payments is a bank orchestration platform that comes with built-in integrations to banks and automatically fetches and processes pain.002, camt.52, camt.53, camt.54 and many more files and messages to make them available to fintech companies via API, webhooks and a central dashboard.