From the September 2011 issue of Treasury & Risk magazine

Shaping eBAM Standards

Electronic bank account management is gaining momentum but early pilots show that standards need to be interpreted consistently. So SWIFT has stepped forward with its central utility to help provide bank neutrality.

SWIFT has come a long way in its 38-year history. The Society for Worldwide Interbank Financial Telecommunication was initially conceived as a way to enable its members to communicate securely with each other and to replace the old Telex technology. The member-owned cooperative began opening up its services to corporate users in 1997 and now offers several options for companies to connect to its network: directly to SWIFT, via a SWIFT service bureau or with Alliance Lite. Today, 841 corporations use SWIFT and while they have been attracted by the efficiencies and cost savings offered by a standard means of connecting to multiple banks, SWIFT’s services for corporates continue to evolve beyond sending payment messages.

Companies are closely watching SWIFT’s recent move into electronic bank account management (eBAM), an industry-wide initiative to automate the paper-based processes associated with managing bank accounts. EBAM solutions are also intended to serve as a database for signatory information—an area currently riddled with inefficiencies for many companies.

Raffi Basmadjian, France Telecom’s head of group cash management and treasury IT, highlights some of the obstacles corporations face in managing their bank accounts: “Let’s say that someone is leaving or joining the organization. We have to renew all the bank mandates. To do this, we have to write a letter, send it by post, and then wait for the bank to read it and update the settings. We’re never sure that this has been done, or that it has been done fully.

“At the end of each year we send the bank a letter asking for a list of the company’s bank accounts and signatories,” Basmadjian continues. “Every year we’re surprised to see in the bank’s response the names of people that have left the company years ago. For this reason, eBAM is interesting for us. It’s quite strange on the one hand to have all this technological gear and on the other hand be working with a paper, pen and envelope.”

With much momentum coming from corporations themselves, the concept of eBAM has steadily gained ground and is now poised to come to market. A number of banks, including Bank of America Merrill Lynch, BNY Mellon, Citi and J.P. Morgan Chase, have conducted eBAM pilots since the introduction of SWIFT’s XML-based eBAM standards in April 2010, and many more corporations expect to use eBAM once it becomes widely available.

“Opening accounts, managing accounts and corporate signers—that’s a real pain point for the industry,” says Eileen Dignen, managing director and head of banking initiatives for the Americas at SWIFT. “SWIFT sits in the middle of that industry, so we were asked whether we could help with this headache. We came up with the role that we could play in the eBAM initiative.”

Intel has taken part in an eBAM pilot. However, the road proved to be somewhat bumpy. “Some problems have come up and the project went on the back burner for some time,” says Don Davis, treasury project manager at Intel. “We were making progress with the maintenance of signers, but when it comes to opening bank accounts electronically, it’s hard for the banks to get past the concept of not having an ink signature somewhere.” Nevertheless, Intel is set to have 200 accounts on eBAM for maintenance in early September.

Microsoft also has a keen interest in eBAM and has participated in a pilot with one of its partner banks, although ultimately its intention is to move to a multibank eBAM offering.

“From our perspective, the biggest benefits will be simplifying the workflow in bank account administration, in having a single portal that will provide information on all of our global bank accounts and update status in real time,” says George Zinn, treasurer and corporate vice president at Microsoft. “Cost savings are going to be tremendous. The green aspect of a paperless process—if it can all be turned around electronically and processed in a secure manner—is going to be a big win.”

While eBAM has attracted a lot of interest, the project is still in its infancy and the shape that eBAM will ultimately take is not yet clear. Proprietary bank offerings may have their uses, but for companies like Microsoft, which works with over 80 banks, a single portal and format are critical.

“There are still very few banks that see they have to integrate at a multibank level to really add value to corporations,” says Colin Kerr, industry solutions manager for worldwide financial services at Microsoft. “My opinion is that’s a fairly short-term view. The true value to corporates is to offer a single solution for multiple banks.”

This goal has been noted by treasury workstations, which are looking to incorporate eBAM technology into their systems. Meanwhile, SWIFT is currently piloting a program that may provide the bank neutrality that some companies are looking for, along with a means of ensuring that eBAM standards are interpreted consistently across the industry.

“Right now, the community is working with SWIFT on a pilot called the eBAM Central Utility, looking at furthering the standardization and the use of XML standards for eBAM,” says Stacy Rosenthal, head of corporate and banking strategy for the Americas at SWIFT. “The working group involved vendors, banks and corporates working together to test features, look at how to validate that standards are OK and that they are not being proliferated between financial institutions.”

The working group has been meeting since the beginning of 2011. The project has a global focus, with both U.S. and global banks and corporations participating, as well as corporates’ SWIFT service bureaus where applicable.

One objective of the SWIFT utility is to ensure that eBAM standards are interpreted in a uniform way. “In the eBAM pilots that have happened prior to now, there have been significant variations, whether relating to the header of the message or the attachments and some variations of the standards,” says Rosenthal. “But knowing what’s happened with payments and information reporting, we really wanted to get ahead of this and be proactive.”

The proliferation of standards is an important consideration. With a number of banks working on different eBAM pilots, the prospect of too great a divergence is a real danger. “The key is to make sure every player is focused around conforming to the standards we’ve all agreed to,” says Linda Haddad, a senior vice president and global product manager for SWIFT and eBAM at Bank of America Merrill Lynch.

What the SWIFT eBAM utility offers is a central means of making sure that common standards are used. “The hub acts as a validation point to ensure that the XML standards within the FileAct package conform to the standards and have not been overly customized,” says Rosenthal. “The hub sits in the middle, and it validates the standard and the format of the files and transactions passing through it.”

In addition, the utility provides an online user interface that enables companies to send eBAM instructions as an alternative to using bank-specific solutions or eBAM solutions in treasury workstations. This will be available to corporates that do not connect to SWIFT as well as those that do. Another feature of the hub is a database designed to support the requirements of doing business in different countries and regions.

The utility is currently being tested and the results of the pilot are due to be showcased at SIBOS later this month. “The results of the pilot will dictate where we go next: whether we do go live with the solution; whether it’s going to be cobranded with the industry; whether it’s going to be offered directly through SWIFT or through the banks,” says Rosenthal.

Another aspect of SWIFT’s eBAM offering—its 3SKey digital identity solution—is already available to corporate users. As Intel’s Davis notes, the ability to replace “wet” signatures with digital signatures is an important aspect of eBAM. As such, SWIFT’s recently introduced 3SKey is very much a complementary solution to eBAM.

“When you get into electronic bank account management, the next question is how to make sure you are who you say you are in terms of identity,” explains Dignen. “So SWIFT moved into that space with 3SKey, which is a digital identity product. EBAM and 3SKey go hand in hand.”

SWIFT launched 3SKey in October 2010 following a pilot in France that involved several banks and corporates. The product aims to replace the multiple tokens and passwords companies use with different banks with a single USB token that can be used across all banks. The token contains a unique, anonymous certificate, but unlike some other token technology it does not include any personal information. While 3SKey’s role in eBAM is significant, for some corporates the introduction of a standardized digital identity solution is worth getting excited about in its own right.

France Telecom, best known for its Orange smartphone brand, connects to SWIFT via a service bureau and in the past has worked with SWIFT on the development of XML standards for the ISO 20022 credit transfers now used for the Single Euro Payments Area (SEPA). As early as 2003, France Telecom began to raise with SWIFT the possibility of developing a standardized electronic signature.

“At the beginning, SWIFT was quite reluctant to develop this—as a co-operative, SWIFT doesn’t want to propose anything that could compete with something the banks were proposing,” Basmadjian says. “Of course, some banks are able to provide certification authority to their customers. But we told them that for a company like France Telecom, which is in the retail business and working with many different banks, it is not practical for us to use a different security device for each bank. We needed something generic and universal—which is why corporates want to work with SWIFT in the first place: so that they can work with all the banks in the same way.”

France Telecom, which turned over 45 billion euros ($60.2 billion) last year and has 217 million customers worldwide, was involved in the 3SKey pilot in 2010 and is currently in the process of rolling the solution out.

Basmadjian hopes 3SKey will improve the security of the company’s payments: “When it comes to SWIFT, you can send whatever you want without identifying yourself—we send a BEI [Business Entity Identifier] code and that’s all.

“We use a service bureau, which means that the SWIFT access is not on my premises but hosted. We strive to work in a secure environment—but you need to prepare for the worst and hope for the best. If there was a security breach, it is possible that the bank might receive an order that seems to be from France Telecom, process it, and then we might discover that it is fraud. With 3SKey, I can make sure that the order sent is signed by people identified by France Telecom as signatories.”

While Basmadjian is enthusiastic about the benefits of 3SKey on its own, the tie-in with eBAM is another benefit of which he intends to take advantage: “For me, it’s only a matter of time before we use eBAM.”

Not all treasurers are queuing up to buy 3SKey. Xavier Hourseau, information system and operation director at Alcatel-Lucent’s group treasury and its Electro Banque unit, explains that the company has gotten its fingers burnt with digital signature technology in the past. “In 2006, we equipped all our signatories with the same kind of keys that SWIFT is using now,” he says. “After four or five years, it became a nightmare.

“We have around 400 signatories around the world, and between the ones who lost their keys, the ones who tried to put MP3s on it, the ones who just burned the certificate on it, it took us a huge amount of time in maintenance and it was not very useful,” Hourseau explains. “After the first couple of years, there were also issues whereby the computers weren’t recognizing the certificate on the token because Windows had been upgraded.”

Earlier this year, the company decided to stop using the tokens. Alcatel-Lucent is now using a different type of RSA-based digital verification.

“I am in favor of electronic signatures that can be stored in a central point,” Hourseau adds. “But these need to be purely dematerialized, without a physical key.”

Nevertheless, SWIFT reports that interest in its digital identity product has been “explosive,” with more than 20,000 tokens shipped and 18 banks subscribing to 3SKey so far.

“Globally, we’re seeing a big migration from smart card technology,” says Rosenthal. “Because 3SKey can be used outside of the SWIFT network, organizations are implementing it in regions that may not have two-factor authentication today, or to replace other technologies that may be up for renewal. There is a lot of interest in using 3SKey in ebanking portals, to sign e-mails and to sign payment transactions, above and beyond eBAM.”

“3SKey is an example of where SWIFT can be a catalyst for industry-wide process improvement through standard setting and central facilitation,” says Peter van Rood, corporate director of treasury at paint and coatings company AkzoNobel.

There’s more to SWIFT than eBAM and 3SKey. Other initiatives under way include the development of business intelligence products, which in the context of payments can allow users to benchmark their own payment trends and forecasts against information about the industry as a whole.

In the past year, SWIFT also extended its securities trade information and confirmation capabilities to corporate users. Intel is one of the first companies to use this facility.

“The newest thing we have done with SWIFT is the use of SWIFT Accord,” comments Davis. “The advantage for us is that we can do confirmation matching for the FX transactions we do today. So far around 30 counterparties are set up sending us the 300 series messages—confirmation for the FX. We’re in the process of notifying counterparties that we want to receive confirmations that way.”

Alcatel-Lucent is beta testing SWIFT’s MT 798 trade offering for corporates, which automates the processes around requesting guarantees from banks. And future initiatives from SWIFT could focus on areas like sanctions screening.

For now, however, the eBAM project remains the hot topic for many corporate users, and SWIFT’s contribution to the project is acknowledged across the industry. “I would describe SWIFT’s role as fundamentally important to making eBAM happen—both in the creation of the standard and in the adoption, deployment and use of the standard,” says Bob Blair, executive director at J.P. Morgan.

While the multibank eBAM solution that corporations like Microsoft are looking for remains some way off, progress continues at a healthy pace. “Less than two years ago, we were talking about the prospect of eBAM, and now we have clients live on application,” concludes B of A’s Haddad. “That’s a pretty quick turnaround, and mostly driven by SWIFT.”


To read about a promising pilot of electronic bank account management, see The Dawn of eBAM.

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