As the number of payment providers and transaction volume increases, the way we handle, process, and analyze financial data is quickly evolving. Modern finance teams are leveraging financial data platforms to automate their financial data operations across providers.
But what exactly is a financial data platform? What does it do? In this post, we’re breaking down the basics of financial data platforms, a key to unlocking productivity and financial data integrity in a rapidly evolving landscape.
What is a Financial Data Platform?
A financial data platform is a centralized system that aggregates, processes, and automatically reconciles financial data from various sources within an organization. It's a financial operations hub, purpose built for financial workflows, offering tools and functionalities for data extraction, transformation, reconciliation, and analysis across every source of financial data leveraged by the organization. Rather than relying on in-house bespoke reporting systems, finance teams leverage financial data platforms to self-serve automated reconciliation and accounting, ensuring that all financial information is accurate and up to date in real time.
Key Components of Financial Data Platforms
- Data Aggregation: FDP’s collect data from diverse sources like banks, payment gateways, accounting software, and common financial files, enabling a unified view of financial data within an organization. FDP’s provide a single entry point for all reviewing financial data at an organization, enabling finance teams to quickly identify specific transactions and verify complex funds flows.
- Data Cleansing & Transformation: Any raw financial data, which is diverse in format and structure, is standardized and modified into a cohesive, queryable format, with clear controls and lineage. FDP’s provide for robust data automation.
- Financial Controls: It's crucial to ensure that financial intents are consistent with company expectations and regulatory requirements. FDP’s enable automation to enforce the procedures and policies that help companies oversee their financial information and reporting.
- Automated Reconciliation: An integral aspect of FDP’s, reconciliation ensures that financial data aligns and corresponds with data from other sources, like bank statements or third party processors. By enabling automated reconciliation processes, finance teams can quickly verify the accuracy of financial data, spotting any discrepancies, and resolving them promptly.
- Automated sub-ledger entries: As organizations grow in and evolve, modern finance teams strive for high resolution accounting. FDP’s allow companies to maintain detailed, transaction-level subledgers across their organization, to ensure complete visibility and robust categorization of transactions across the company.
- Reporting Source of Truth: Financial data often exists across a vast array of sources, including internal databases & reporting platforms, banks, accounting software, and payment processor portals. FDP’s enable teams to build a unified source of truth for their financial data, enabling real time visibility into their financials and smooth audits.
Benefits of Financial Data Platforms
- Holistic Financial View: Consolidating all financial data provides users with a comprehensive overview of their finances and key data.
- Enhanced Accuracy and Trustworthiness: Automated reconciliation and stringent financial controls reduce errors, ensuring data is reliable and trustworthy.
- Efficiency and Time Savings: Automation significantly reduces manual input, allowing for strategic focus.
- Cost reduction: Financial data platforms greatly reduce the cost of in house technical support for key data flows, allowing organizations to operate efficiently.
- Flexibility and Scalability: As financial data volume grows, these platforms scale efficiently, as they’re purpose built for high volumes of transaction data.
How Financial Data Platforms differ from other finance software
Financial Data Platforms vs. ERPs
- FDPs and Enterprise Resource Planning (ERP) software serve different purposes. While ERPs manage company finances, they often lack the robust, embedded rules engines to automate the processes and workflows that FDPs provide. Financial data platforms are designed to work with ERPs, enabling efficient financial management.
- Financial data platforms often offer flexible sub-ledgers to allow for high volume accounting outside of the ERP. For example, companies use Proper’s subledgers to manage high volume transactions.
- FDPs are built to handle high transaction load and can help manage more robust data intensive operations, such as normalization, transformation, and reconciliation.
Financial Data Platforms vs. Payments Orchestration
- Payments orchestration platforms coordinate interactions between a set of payment processors. An FDP, on the other hand, is payment & data source agnostic, consolidating and processing the financial data, enabling finance teams with self-serve tools for data infrastructure.
Who Uses Financial Data Platforms?
- Fintechs startups: Fintech startups are rapidly adopting financial data platforms as opposed to building bespoke financial data infrastructure in house. These platforms support rapid financial product evolution and innovation by enabling companies to quickly stitch together a diverse set of providers. This empowers fintech companies to create differentiated experiences for their end users while maintaining data integrity and a great customer experience. With FDP’s, fintech startups are able to scale their companies quickly with the tools they need to manage and operate their financial products.
- Banks and Financial Institutions: Modern banking leans on financial data platforms for real time financial data management and sub-ledgering, allowing unique business models and huge savings relative to proprietary or legacy solutions.
- Enterprises: Large, growing businesses with complex financial mechanisms extract immense value for comprehensive financial data automation solutions.
A financial data platform isn’t just a tool, it’s a critical piece of software for the modern financial operations stack. By integrating reconciliation and financial controls, FDP’s offer a comprehensive approach to data management for modern finance and operations teams. Whether you're a mature organization looking to improve efficiency with automation or an early stage startup looking to launch differentiated products, implementing a financial data platform can be transformative for your business, allowing you to move quickly while maintaining complete data integrity.
For those interested in exploring financial data platforms, Proper offers a comprehensive solution for companies of all sizes.