Bank account management (i.e. the opening, amending and closing of accounts, and maintaining of up-to-date mandate and signatory information) has long been regarded as a highly manual and labour-intensive process for corporations. Typically it involves the faxing, emailing, and mailing of documents, in addition to phone calls, and sometimes even visits to banking branches. In fact, it can take weeks to merely open or close a single account and the ongoing maintenance requirements for active accounts can consume a good deal of resources.
Many companies also lack a centralised repository to store essential data on all of the bank accounts they hold; information on some may reside in treasury systems, while information on others may be kept in payments systems, and others still may be kept on spreadsheets, with none of these containing a complete set of information regarding the actual account. This is especially apparent in corporations with non-centralised treasury operations where bank accounts may be managed at a branch or legal entity level with no visibility at the corporate level.
Compounding these challenges is the lack of process standardisation that exists from country to country, and even bank to bank. This can lead to lags in information delivery, security issues and can drive up costs related to manual intervention. For companies that hold numerous bank accounts, the time and resources expended on allocating staff to actively monitor and maintain accounts can quickly add up and take a toll on the bottom line.
Larger-sized corporations that are managing thousands of bank accounts spanning tens, even hundreds of banks across multiple geographies, each with its own methods in place for doing things, may need to follow a different set of processes for each one. And the result has been that corporates have had to manage each of these different sets of processes separately, at significant cost to the running of the business.
eBAM to the Rescue?
The days of manually managing bank accounts may be numbered with the recent introduction of electronic bank account management (eBAM) which sets the standards for two way communication between the corporate and their banking partners. Standards for the message formats that are used to communicate, as well as the method of communication have already been established, making it easier for corporates and banks to exchange information. eBAM may just revolutionise bank account management, as there is now a standard and distinctive format in place for corporations to use when sending messages to their banks.
All companies, regardless of their size or location, can benefit from automating bank account management (BAM). By simplifying communication with their banks and reducing the often drawn out cycles related to bank account management, corporations can now ensure that they have ample visibility, security and efficiency in their banking relationships.
As discussed, corporations usually communicate bank account information to their banks via postal mail or e-mail, but with eBAM, communication will be sent automatically and directly to the bank as a secure electronic message in a format that the bank’s systems can interpret. This will foster efficiencies and instill straight-through processing (STP) into a process that has historically been time-consuming and prone to error. Corporations can expect to receive confirmation details of information in hours or even minutes, instead of potentially days or weeks under the manual method. This improved speed in data transfer will be accomplished through messages being transported via a single electronic channel, which all banks will likely participate in eventually.
Service quality offered by banks is another area that could stand to see improvement – and just may – with the introduction of eBAM. A large part of improving service levels will be dependent upon banks putting forth the effort to standardise their processes, enabling corporations to deal with all of their banking partners in the exact same way. This will aid corporations in saving both time and money, as well as gaining improved visibility and controls around BAM.
eBAM solutions can also help corporations to alleviate risk by reducing the need for data to be handled manually and thereby reducing the potential for data to be misreported or fraud to occur. Furthermore, by introducing standardised messaging and workflows that are intrinsic in eBAM solutions, corporations can more easily comply with audit requirements. Corporations stand to benefit greatly from complete visibility and the necessary tools to monitor bank account activity in real-time, as opposed to waiting around for information to be delivered.
Many technology vendors are already offering eBAM platforms to the corporate market that can introduce automation and foster connectivity by plugging companies into the SWIFT network and ISO 20022 certified XML messages. Having this access can standardise the way in which requests are communicated from corporations to their banking partners and in effect help them to promote efficiencies.
What Still Needs to Happen to Make eBAM Work
While corporations may be poised and ready for eBAM, most banks are not there yet. Presently, very few banks are able to receive eBAM messages, let alone process them in an automated fashion once they are received. The adoption rate among banks is expected to be sluggish at first, as there will be a large amount of work to be done in terms of revamping internal processes around fulfilling bank account management requests. However, we are already seeing an expanded level of interest among banks and this trend is expected to accelerate in 2011.
Corporates need to remain focused on demanding that their banking partners are moving forward with eBAM enablement plans by optimising their back end processes to be able to handle and automate the processing of eBAM messages. They should also embark on an eBAM initiative of their own by gathering all of their bank account information, signers, mandates, contacts, and all other associated information into a centralised repository. Next, enable workflow within the centralised repository to create and enforce compliance to BAM policies around account opening, closing and signer mandate management. If a corporation prepares in this way, they will be ready to take the next step and employ eBAM messages as soon as the banking partners are fully enabled.
Banks are beginning to understand that they can realise the same benefits that the corporate can from adopting eBAM – automation, efficiencies, lower costs, and better control, to name a few. Based upon the high level of interest from the corporate side, banks are also beginning to realise how much of a competitive advantage they could gain by being early adopters of full eBAM functionality. This could put them in a position to provide STP around BAM requests, something that has never been seen in the industry. All of this will lead to significant improvements on service level agreements (SLAs) with their customers, leading to higher customer satisfaction levels.
While we have certainly seen improvements in the speed and ease of communication between corporations and their financial trading partners, there continues to be room for improvement. The demand now is for a single point of connectivity and uniform set of messages that can be used to bridge the gap in communication between banks, SWIFT and even corporate-to-corporate communications. The eBAM initiative is a step in the right direction. Having the ability to standardise the way in which requests are communicated from corporations to their banking partners will help them to promote efficiencies, drive down operational and transactional costs and reduce the risk of fraud.
Europe’s opening banking regulation is finally here. After months of preparation across the continent, the Revised Payment Services Directive comes into effect on January 13.
The cost of compliance efforts for banks has increased exponentially in recent years. This is especially true for those banks that are active in the global trade finance domain, where the overwhelming expectation is for compliance requirements to become even more complex, strict and challenging over time.
This year promises to further the regulatory compliance burden imposed on financial institutions. How are firms in the sector responding to the challenge?
A 'digital treasury ecosystem', where the CFO or treasurer makes real-time financial decisions on their tablets, is not far beyond the reach of currently available technology. In such an ecosystem, there is no direct reliance on banking partners or the company’s broader organisation - just an executive and an interactive dashboard powered by interconnected digital technologies, writes Eric Cohen, PwC.