With an increasingly globalised and complex economy as well as higher compliance demands, the management of corporate bank accounts has become complicated. Gaining real time overview and avoiding hidden costs is not easy. The provision of electronic bank account management (eBAM) could provide the answer. eBAM has come a long way since 2005, a major milestone being the creation of the extensible markup language (XML) ISO 20022 standard for financial services messaging, yet the development still hasn’t got progressed far enough to encourage widespread adoption.
eBAM is still regarded as being the ‘next big thing in treasury’, but so far it is more like an eternally promising concept. Treasurers want to have a powerful tool at hand and they expect eBAM to meet a list of requirements, providing visibility and control with central management overview at all times, compliance and security that reduce fraud through process transparency, approval of workloads, and auditability, efficiency and cost reduction, and strong negotiation with banks. Treasurers also expect to receive information on demand in their format of choice, with the possibility of adjusting the views.
What’s been Achieved: What’s Still Needed?
Since the early days of the eBAM concept it has gone from being corporate-centric to bank-centric, yet even now many banks are not ‘eBAM ready’ or capable. For eBAM to be a success requires integration channels for country and bank-specific requirements, where communications to banks meet legal requirements and are not overly complicated. Other items of the ‘to do’ list include:
- Information needs to be centralised for ease of use to meet compliance requirements.
- Archives of account information must be aligned with auditing processes to prevent fragmentation.
- Significant realignment of data, systems, and processes needs to be completed to provide straight-through processing (STP).
- Paper-based processes must still be retained while embracing the new age techniques, such as digital signatures.
- There needs to be legal acceptance of digital signatures and dematerialised document transfers.
- Back office systems, typically memo and batch based, need to support high degrees of real time interaction.
- The standard messaging format needs to define standardisation to eliminate the need for multiple different forms.
Against all this, the reality is that there are still too many isolated solutions like point to point exchange. Only if there is a real single multibank access possibility will eBAM become attractive enough to achieve widespread usage among corporates. Otherwise only the major multinational corporations (MNCs) will turn to eBAM, reflecting their large number of accounts with global banks currently offering eBAM services.
The Future of eBAM
Banks and service providers have recognised the need for a multibank solution so, for example, Citi is preparing for pilots of a host-to-host multibank solution while SWIFT is working on a so-called central utility as a multibank solution. Given the latter’s declared vision to take underlying infrastructure and make it more open and interchangeable to work with any entity, SWIFT will form a huge part of the ultimate solution and be the driver for further evolution of eBAMs, especially with the predicted increase in SWIFT messaging.
Version two of the XML ISO 20022 standard, due for release in the first quarter of 2013, should also support the further development of eBAMs. It will contain country-specific rules and customer direct debit initiation messaging. ISO 20022 v2 will contain cash management messaging that allows corporates to obtain intraday and end-of-day account balance reports. Electronic signature (e-signature) specifications will also be included in the new version that support the signing of multiple signatures and signing of individual messaging attachments. The eBAM capabilities will include a repository for bank account information and documentation, workflow manager to enforce compliance rules and segregation of duties, reporting to meet internal and regulatory requirements, and electronic messaging (e-messaging) exchange capabilities through SWIFT.
There are also other anticipated trends that involve eBAM. One is that corporates will step up their demand for hosting and managed services for financial applications, increasing statistical modeling for credit risk assessment and continuing to increase trade financing of suppliers. With a renewed focus on compliance and the adoption of hub and spoke networks, this would also facilitate the corporate-to-bank communications (C2B), which could involve eBAM.
Cloud-based technology services are expected to lead strong growth in eBAM, where cloud-based account management service automates the entire account management process, improving security and streamlining treasury processes. It enables accurate and real-time C2B communications and closes the audit gaps between company records and bank records.
Among other anticipated developments is the closing of gaps in the integration channels of eBAM, including legal and regulatory acceptance, the evolution of standardised messaging formats and more control in customer experience that facilitates the overall account management process. Integration solutions would include enterprise resource planning (ERP), cash management, human resources (HR) and legal systems being integrated under the overall eBAM approach.
In conclusion, eBAM can really become a success story, but to do so it needs to address the most important issues such as multibank functionality, legal and regulatory requirements and easy access first. Without the solutions to these basic issues, and with banks still struggling to become eBAM ready, it will remain a promising concept without achieving the great leap forward.
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