There has been plenty of talk about electronic bank account management (eBAM) for the last few years, but not a lot of action. That changed in October, when Bank of America Merrill Lynch announced that one of its corporate customers, USI Insurance Services, was live on eBAM. Despite that achievement, bankers and vendors said that there is still much work to be done before the technology reaches its full potential.
Dan Gill, senior vice president at Weiland Corporate Solutions, a unit of Fiserv, compared the first message sent in October with the first phone call, describing it as eBAM’s “Alexander Graham Bell moment.”
“We crossed that hurdle,” Gill said. “Now it’s a matter of getting more banks doing it, here and overseas.” Given the interest in eBAM among corporate treasuries, he said, once the banks sign on, treasuries will follow.
Hurdles to Streamlined Account Management
Electronic bank account management aims to simplify the work involved in keeping track of bank accounts for companies that may have hundreds of accounts at a number of different banks around the world. While individual banks offer proprietary eBAM solutions for their customers, the multibank version involves a set of extensible markup language (XML) messages that corporates can send over the SWIFT network to their banks to open or close accounts, change the signers, or get information about accounts.
Version one of the eBAM messaging standard was approved in 2009, noted Glen Solimine, executive director of treasury services at J.P. Morgan. “The standard has been out there for quite some time,” Solimine said. “The challenge was that nobody was adopting it.”
One barrier was differences in the way various banks interpreted eBAM standards and their varying requirements for transactions such as opening an account. SWIFT had proposed building an eBAM Central Utility (E-CU) platform to ensure consistency, but that project stalled for lack of funding.
So some banks and vendors formed the Global Rapid eBAM Adoption Team, or GReAT, and set themselves the goal of enabling several corporate clients to use the eBAM messages in production via SWIFT. JPMorgan, Bank of America Merrill Lynch and Citi were the banks involved, along with SunGard, Weiland, e5 Solutions and USI Insurance.
The members of GReAT worked together to iron out differences regarding the XML messages. They went through the details of the messages and talked about “specific elements that were in the standard that were interpreted a little differently from one bank to the next,” Solimine said. And they “harmonized” each field contained in the messages—figuring out, for example, whether name fields should be set up as first name then last name, or last name followed by a comma and then first name.
“We had to work through the details to make this actually broadly adoptable,” Solimine said.
As a result of that effort, “now there’s a harmonized version of the standard,” he said. And the GReAT project has set itself a second milestone: “to double the number of banks and clients in production and introduce [eBAM] into new regions” outside of North America by the end of March, Solimine said. “We should be able to harmonize the messages across all regions as well.”
Paul Bramwell, senior vice president of treasury solutions for SunGard’s AvantGard corporations business, said the hope was that once the banks and vendors had agreed upon standards, and companies were able to send eBAM messages, that success would attract more banks and vendors to sign on, creating momentum for the technology.
“The banks have such disparate back-end systems,” Bramwell said. “Normalizing all the data and transforming it is not so easy at the banking level—I think that’s why [eBAM’s] been so slow.
“Now that we’ve got these messages flowing, we have had quite a lot of interest from other banks and from vendors,” he said, but noted that there is “still lots of work to do and still a lot of disagreements among the banks.
“For banks, which operate in lots of jurisdictions, there are a lot of legal requirements related to opening or closing a bank account,” Bramwell said. “A lot of those standards still have to be ironed out.”
Weiland’s Gill said that given the different requirements for banking transactions in each country or region, eBAM’s global rollout could be a prolonged process. “There are going to be some knots and bumps along the road, especially as we move into Eastern Europe and Asia, and maybe even, before I retire in 20 years, China,” he said.
Arun Sinha, head of channel and enterprise services for North America at Citi and chief operating officer for the bank’s treasury and trade solutions business in North America, clarified that a “holistic” multibank eBAM solution is “in pilot stage continuing into 2014 and beyond, and progressing forward with collaborative efforts between banks, eBAM vendors and clients.” And Sinha, pictured at left, noted that in the current process, companies follow up some eBAM messages with a paper document or a PDF of the document where required, although in some cases an existing document may be leveraged to complete the eBAM request. For example, a company that is opening an account may need to send the bank a board resolution authorizing it to do so. “That piece is still not on SWIFT, so to speak, and therefore that has to be a paper form or scanned copy which needs to be exchanged,” Sinha said.
Sinha said that GReAT includes a group working on standardizing all the documents and formats that may need to be attached to an eBAM message.
Tom Durkin, global head of integrated channels at Bank of America Merrill Lynch, said that while eBAM “doesn’t eliminate all aspects of paper,” the companies that he works with are more interested in other aspects of the solution. “Automating, getting some efficiency in signer management is more important than taking paper out of the flow,” he said.
Bramwell noted that PDFs can be attached to SWIFT messages. While the regulations in different jurisdictions about required documentation make it difficult to achieve a “paperless and PDF-less” eBAM, that’s a goal that vendors and bankers would like to aim for, he said.
“I think ultimately we will get there,” he said. “The paper trail will be the outliers, but I think it will be an ever diminishing set of circumstances that still require paper.”
As the work continues on multibank eBAM, Sinha noted that banks’ proprietary solutions are another avenue for treasuries interested in bank account management. “What clients struggle with today is maintaining a record or database, or auditing who are the signatories on various accounts,” he said. “That is now available to you at the click of a button.”
Citi’s proprietary bank account management solution is available in more than 50 countries, although Sinha noted that not all countries accept digital signatures. In countries where “wet-ink” signatures are still required, clients would put together the forms electronically, then print them out, sign them and send them to the bank, he said.
Durkin said he sees B of A’s proprietary and multibank versions of eBAM as “complimentary.” He noted that some companies want to start with a proprietary solution while they make plans for adopting the multibank version of eBAM over a longer time frame.
While eBAM is designed to reduce the work associated with bank accounts, preparing to adopt eBAM involves considerable work for companies.
Nancy Colwell, director of treasury at USI Insurance Services, the company that went live on eBAM in October, said that when USI signed up for eBAM at the end of 2011, she expected to be up and running by the end of the second quarter of 2012. “And here we are finally getting around to it.
“Banks were not as ready as we understood them to be,” said Colwell, pictured at right. She also noted the considerable amount of work USI’s treasury had to do to get going on eBAM. “A lot of it was just laying the groundwork,” she said. “Once the system is installed, you have to do a lot of data validation.”
USI is a privately held insurance brokerage in Valhalla, N.Y., with close to $700 million in annual revenue. Colwell saw value in eBAM because “we do a lot of acquisitions, and we have the need to open accounts quite frequently and change signers quite frequently.”
She also noted the benefit eBAM provides in terms of internal controls. “It really does restrict the ability to do anything on a bank account to only those users who are authorized on the system, and [it] provides an audit log of all workflow activity,” she said. “It was also a matter of saving time and reducing the manual effort previously required for bank account administration.”
The company has more than 100 bank accounts, about 85 percent of which are at its largest bank, Bank of America Merrill Lynch. “We knew they had their own product, but we thought a bank-agnostic system would be a little more flexible if and when our remaining banks become eBAM capable or if we decide to expand our banking relationship to include other eBAM-capable banks,” Colwell said.
USI’s to-do list once it signed on for eBAM included working with the vendor that provides its eBAM solution, SunGard, on which fields the company wanted to include to enhance reporting functionality. Then, since some of those fields weren’t in the company’s existing bank account management system, USI had to collect the data.
“We had to do a lot of information gathering and data entry, and then validation of that data,” Colwell said. “The bank also pulled together all the data they had in their system and we validated it against our data to make sure all of our legal entities, accounts and signers matched.”
Even though USI already had a bank account management system, it found inaccuracies. “We thought because we were very diligent about keeping things up to date, our records would match what the bank had on file,” Colwell said. “There were several accounts where they had authorized signers who had been gone for years, despite our having submitted paperwork to remove them. There were also signers we thought we had taken off, but we hadn’t. Now that we are in production, we can be certain that going forward both our records and our banks’ will be accurate.
“It was a lot of cleanup work,” she said, and added that companies contemplating eBAM should be sure their bank account information is in good shape. “Making sure it’s current, it’s up to date, [and] it’s accurate will save a lot of time and effort as you go through the eBAM implementation,” Colwell said.
Citi’s Sinha noted that there is a one-time effort involved in collating and streamlining paper-based and decentralized records, and said getting a corporate customer onto Citi’s bank account management solution takes eight to 12 weeks. The bank’s process includes converting the client’s existing documentation into electronic format and creating a database of all the signers on the company’s accounts. The continuing benefits far outweigh the initial effort though, he said.
What is the target audience for eBAM? Companies “with over 100 accounts, between 100 and 500 accounts, are certainly looking at it,” Durkin said. “But we have some clients that have less than 50 [accounts] that are using it.”
Solimine said the key metric determining whether companies will benefit from eBAM is the number of bank relationships they have. “Somewhere between two and maybe 10 banks in your network, it becomes difficult to have to log onto various bank systems every time you have a signer change,” he said. “It makes sense at that point to have a central repository of all your banks, go in, make a signer change and have [the repository] disseminate it, then manage the confirmations as they come back from the banks.”
While the process of expanding eBAM to more banks and more parts of the world may take time, bankers and vendors say the solution offers real benefits for corporates, first and foremost by eliminating much manual work.
SunGard’s Bramwell, pictured at left, said he talks to companies about the advantages of eBAM in terms of employee headcount. “Some of the larger companies we have as clients maybe employ two or three people full-time in managing those banking relationships,” he said, and added that in certain industries, companies are required to open a bank account for each project they undertake. “When companies talk to us about eBAM, that’s usually what they’re interested in,” Bramwell added.
“The other nontangible benefit is the reduction of fraud,” he said. “To be able to rationalize from a risk perspective what accounts and signatories you have is becoming more and more important for a lot of companies whose auditors are coming in and saying, ‘Show us you have a good idea what accounts you have, who the signatories are, what process you have when somebody leaves the company to remove them as a signatory.’”
Bramwell said auditors have picked up on the fact that technology is allowing for faster turnaround. It used to take a few weeks to remove signers from company accounts, he said. “With better technology, you’re able to do that far more quickly.”
And eBAM could come in handy in dealing with the U.S. Foreign Bank Account Report (FBAR) requirement that employees who are signers on company bank accounts located outside of the U.S. with an aggregate value during the year of more than $10,000 indicate that on their own tax returns and then file a report with the IRS.
Now that the first corporate has gone live on eBAM, “I think you’ll see a nice gradual onboarding through the end of this year and next year, especially as we’re moving on to additional milestones—more banks, more vendors,” said Stacy Rosenthal, senior business manager for SWIFT Americas. “The value of eBAM is to have more banks on board.”
J.P. Morgan’s Solimine also cited a pickup in adoption. “We have a lot of clients looking to implement in the first quarter.”
Even though eBAM is still a new technology, it offers “a huge amount of benefit even with the rudimentary standards that we have in place,” Solimine said.
“As we continue to use the standard and companies start leveraging their systems, we’re going to find ways to improve it,” he added. “That’s why it was so important to get to the point of live traffic.”
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