The instruments for electronic bank account management (eBAM) are currently offered in various forms by treasury management software suppliers, an increasing number of large banks, SWIFT and providers of other applications in the field of connectivity and digital identification (ID).
eBAM enables digital bank account management through a direct connection to banks, creating an overview of all bank accounts. It allows the corporate treasurer to manage the authorised signers and their respective limits, approve authorisations, correspondence and related services such as credit lines and payment limits.
After completion of agreements with the banks, SWIFT-standardised extensible markup language (XML) messages with documents can be sent directly to the banks over a secure web portal with digital ID authorisations, although the option to make use of digital identities, including signatures for account management, is dependent on local legislation and regulations. SWIFT also has its 3SKey system, which can help cross-border. If IDs are authorised, it allows for the opening and closing of accounts or change of authorisations, without any paperwork. All communication is recorded and saved, leaving a traceable audit trail for all actions taken. This makes for transparent and controllable treasury and finance processes, satisfying internal and external auditors.
Trends such as centralisation, the standardisation of treasury processes and the desire to avoid bank proprietary technologies where possible have risen sharply over the past few years. They have been driven by an increasing need for visibility, cash flow optimisation, less bank dependency and improved control and management of risk elements. This has created demand among corporate treasurers for suitable instruments, driving them to invest in traditional treasury management systems (TMS) as well as in payment factories, SWIFT connectivity and bank rationalisation programmes.
Time Savings, Lower Risk and Control
Implementation of an eBAM application involves several steps. Corporate treasuries need to choose the banks with which they intend to deploy eBAM. It is important to verify and carefully evaluate the bank services offered, as these can vary widely in the market. The platform must also be selected and in the case of a single bank relationship, the existing internet banking application may suffice. On the other hand, if the corporate holds accounts with more than one bank, eBAM based on the existing TMS may be the natural choice as, increasingly, these systems are being upgraded to include eBAM capability.
Irrespective of the platform chosen, agreements have to be reached with the banks regarding communication and formats to be used. For example, eBAM-standardised XML messages including documentation or other agreed formats. eBAM messages can then be sent though the chosen application or via a secure internet connection.
Moreover, direct communication via SWIFT is possible independently of banks. If a corporate already has a SWIFT connection, eBAM will be complementary to the existing communication traffic of bank statements, payments and possibly even digital bank guarantees. If a central payment factory has been implemented and the operating companies’ accounts also fall within the management scope of corporate treasury, the scope of eBAM may be even more extensive.
Corporate treasuries that manage 50 to 100 accounts or more can expect to benefit most from eBAM. These benefits include time savings and reduced risk due to improved visibility and control of bank accounts. Also, the traceability mentioned earlier may result in fewer issues during the audit process. If a company is required to follow the Report of Foreign Bank and Financial Accounts (FBAR) regulations of the US, which demand taxpayers’ submission of authorisations for all bank accounts, even more time and effort will be saved. However, for the moment Know Your Customer (KYC) procedures dictate that opening bank accounts with new banks must be completed outside of eBAM. The market-leading TMS suppliers, in collaboration with banks, have been testing eBAM since the start of this decade and are now slowly beginning to offer live products. Despite the above-mentioned trends within companies, the 2008 credit crisis initially saw development of eBAM services postponed.
Demand for eBAM was evident at Zanders’ seminar on this topic last November. Many corporate participants pointed to established bank account management, so-called ‘BAM’, within their organisations. So far, these treasurers have been waiting for the dust to settle before initiating bank independent-solutions, including the use of XML standard messages within their organisations. A senior product specialist at SunGard, one of the consultancy’s event speakers, claimed to be seeing customers “making the necessary preparations for the move towards eBAM”. The banks present at the seminar also openly appealed to corporates to start preparing for eBAM, further underscoring the growing momentum of this initiative.
But what do these preparations come down to? Firstly, it is essential that systems, processes and infrastructure are already working optimally within corporate treasury. This is an essential assumption for effective and efficient control of bank accounts. Effective processes are characterised by timely, accurate reporting of all bank account information across the organisation.
Periodical analysis of the bank account structure is recommended for optimisation. Finally, any investment decision requires a solid economic analysis in terms of cost and return; which is why eBAM is expected to enable greater efficiency for corporates and significant improvement of bank account structures.
These days forward-looking economic assertiveness – implying a search for efficiency and added value plus an open mind towards global developments – is what corporate treasury departments need to have in place. Why would we maintain a routine-based but administrative burden longer than necessary? Nevertheless, it continues to happen everywhere: employees who are authorised to make payments on the company’s behalf eventually move on. A treasurer is responsible for financial logistics: cash and cash equivalents, the accounts holding these resources, and also for managing access, limits and mandates regarding these accounts. This is why action on eBAM is required from the treasurer, who must also ensure that access to the company bank accounts of a departing employee is immediately terminated as the buck stops with him. Today this can be done electronically – quickly, safely and remotely.
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