A critical pilot last year proved electronic bank account management (eBAM) can work in the real world, and that has set off a wave of activity as banks and treasuries position themselves for a leap forward in the automation of bank-corporate communication.
"Banks now are really motivated to offer eBAM," reports Stacy Rosenthal, head of corporate and payment strategy at SWIFT Americas.
For the critical stress test that showed eBAM was ready for prime time, Bank of New York Mellon recruited three corporate clients--General Electric, Swiss Re and an anonymous New England technology company. It brought SWIFT in as the message clearing network, since GE had a direct relationship to SWIFT, while Swiss Re and the other corporate had SWIFT linkages through their service bureaus.
Finally, BNY Mellon brought in Wall Street Systems (WSS) because Speranza, which it acquired in April 2010, was an eBAM pioneer and was prepared to enforce internal controls.
"Our production pilot used the SWIFT solution," explains Loretta Gannon, a vice president at BNY Mellon Treasury Services, "which enabled our participating corporate clients to access Wall Street Systems' Speranza product to create and maintain a bank account database."
"This was a very significant testing," says Glen Solimine, the founder of Speranza and head of eBAM at WSS. "It validates the messages and the network for practical use." Others have piloted eBAM, notably Shell Oil, Citigroup and Speranza, Solimine notes, but he says those efforts "tested very clean transactions under close to ideal conditions.
"This time, we assumed that things would go wrong," he explains. "We found out what it would take to fix things when they did go wrong. Not everything worked on the first attempt. We took each scenario and found out what it would take to make it work."
The three companies used eBAM to open and close accounts and change signers. "Some messages were sent with missing data, or incorrect forms, and they all worked," Solimine says. "Each time the bank successfully processed the message and sent back the appropriate response.
"In the end, we proved that eBAM could work in every scenario," he says. "We now know that it is ready to go."
Swiss Re is pleased with the outcome and is currently "going through project review and ensuring that all of the security is in place prior to moving forward with eBAM," reports Mark Eliseo, a director at Swiss Re. The technology will increase the speed of opening and closing accounts, improve audit conditions and integrate into Swiss Re's existing core systems, Eliseo says. The company might eventually use eBAM with all its banks globally, but he doesn't see banks rushing to offer eBAM, so he expects that using it beyond a handful of primary U.S. banking relationships will come slowly.
BNY Mellon's Gannon says SWIFT's participation was critical. "When you join SWIFT, you can execute a consultancy agreement," she points out. "We knew they offered that service, and funded the pilot through a consultancy agreement with SWIFT." That meant that Rosenthal and her staff were intimately involved in working out kinks during the pilot.
Rosenthal says the leading-edge component of what Bank of New York Mellon has done is its integration of the eBAM messages with its back-office systems, so requests go straight into those systems without human intervention.
The success of the pilot should give other banks and corporations confidence that investments in eBAM will pay off, says Solimine. But they won't be able to coast home. BNY Mellon's pilot did not produce a plug-and-play network, and other companies and banks will still have to do their own mapping and testing.
"This project still takes work," Solimine says. "That is unavoidable."
Adopting eBAM would be easier if standardization among all the players could be validated. Gannon supports a proposal for a credential for corporations, banks and technology vendors, perhaps from SWIFT, that verifies that they have built eBAM-compatible systems.
"The pilot showed that systems need to be set up in certain ways to accept the standardized messages," she says. For example, Gannon says, "if a corporation sends a file with attachments, and the corporation's service provider uses a header that doesn't recognize the attachments, the bank receiving the message will automatically reject it." An independent party that vets and certifies that all participants' files comply with standards would smooth the adoption of eBAM, she says.
Of course, eBAM is just part of what it takes to automate bank account management. It deals with communicating with banks and executing actions determined earlier in an internal process. If a company hasn't automated its internal bank account management, it won't help a lot to automate the communications, Rosenthal says. Products are available from Wall Street Systems's Speranza and Weiland (now part of Open Solutions), but those aren't the only solutions, she explains.
"You need to figure out how you want to manage your bank accounts, and there are many ways to do it," she says. "The goal is to find a common source of truth about the status of your accounts. Without it, you may find conflicting data."
Given the strong interest in eBAM evident at last fall's Association for Financial Professionals conference, some banks are changing their timelines to get an eBAM product to market sooner, Rosenthal says. "They see it as an efficiency play for them, a way to please clients and a low-overhead way to improve customer service."
Some, like BNY Mellon, are moving quickly to straight-through processing, while others are moving first to a semi-automated solution, she explains.
"Some banks are coding to XML to make integration with their back offices smoother," she observes. "At SWIFT, we're seeing a pickup in requests for testing and questions about standards from corporations and banks alike."
Key players including Rosenthal, Solimine and Chad Barnes of Swiss Re participated in an informal exploratory session hosted by Wall Street Systems at the AFP conference. Corporate participants insisted that they were ready to go with eBAM, but their banks were unprepared. BNY Mellon was frequently praised as the exception, while other major treasury services banks were criticized by name for dragging their feet.
"The biggest challenge for corporates is getting their banks to accept the implementation of eBAM," says Swiss Re's Eliseo.Bankers, however, reportedly insisted that they were ready to go but that their corporate clients were still unprepared.
For a look at the role automation will play in eBAM, read Ready, Set, EBAM.