When the first companies went live with electronic bank account management late in 2013, observers predicted that others would be quick to follow their lead. After all, what corporate treasurer who’s responsible for overseeing a large number of bank accounts wouldn’t want to ditch the paperwork associated with account openings, closings, and signatory changes, in favor of handling those chores with electronic messages?
A year and a half later, adoption of electronic bank account management (eBAM), which allows companies to send messages to their banks using SWIFT XML messages, remains limited.
“A lot of corporates—almost all corporates—are still in wait-and-see mode,” said Bob Stark, vice president of strategy at Kyriba, which provides SaaS treasury solutions. “They’ve seen some progress with individual bank portals, but they have multiple banks. They’re not in the place where it’s quite as useful as everyone would like.”
As of mid-May, SWIFT counted 32 corporates and 18 banks live on eBAM. “Adoption has been mostly large and global corporates domiciled in the U.S.,” said Stacy Rosenthal, head of shared services products for SWIFT Americas.
Glen Solimine, executive director of treasury services at J.P. Morgan, said companies’ adoption of eBAM is related to banks’ adoption.
“The value of eBAM for any particular client increases with the number of their banks that are participating in eBAM,” he said. “For a corporate that’s working with 10 banks, if only two or three of their banks are eBAM-capable, there is value, but it’s not as valuable as if all 10 were live.”
Regulatory changes are partly to blame for the pace of adoption, according to consultants and executives at banks and systems vendors. The work of complying with capital and liquidity requirements stemming from Basel III, reporting requirements related to Dodd-Frank and EMIR, and other new regulations has kept banks busy, pushing eBAM lower on their to-do lists.
“The more urgent, immediate requirements have put this on the back burner,” said Blaise Scioli, director of treasury services at e5 Solutions Group, which provides an SAP treasury management product.
The preparations banks must undertake internally are another factor, said Dan Gill, a vice president at Weiland Corporate Solutions. “It’s one thing to take the message in from the customer, but it’s then got to make things happen within the bank,” he said. “The biggest challenge was the banks had work to do to take that message in and open an account.”
Rosenthal said corporates may also be taking time to be sure they select the right vendor, given that there have been many acquisitions among companies providing eBAM products.
“There’s been a lot of expansion and contraction in the technology marketplace,” she said. “You’ve seen a lot of excitement, people starting to put together projects and then saying, ‘Am I looking at the right vendor, given the current state of play?’”
Scioli pointed out that adopting eBAM involves a lot more complexity than the manual processes that companies have been using to open or close bank accounts or make other changes. Given that starting point, “we’re taking [companies] a long distance when we take them into the eBAM world,” he said.
Corporations that are considering moving to eBAM have to consider the extent of each bank’s readiness. “The state of the matter right now is the banks are offering a fragmented or partial solution,” said Scioli, pictured at left. “They are almost all limited in terms of the geographic footprint [in which eBAM is available], focused on North America and Western Europe.”
Nancy Colwell, director of treasury at USI Insurance Services, sees eBAM’s geographic reach as a factor that could discourage companies. “From a corporate perspective, the work involved in implementing a multibank eBAM solution may not make sense at this point, given that most banks are only offering the solution in North America,” she said.
USI implemented eBAM in 2013, but Colwell noted that the insurance brokerage does business only in the United States.
“A lot of corporates are multinational,” she said. “Unless they can be sure it’s going to work across all of their banks in all countries, they’re probably not going to participate.”
USI, with $1 billion in annual revenue, has more than 100 bank accounts. It uses eBAM for its 81 accounts with its main bank, Bank of America, but also employs the eBAM system as the central repository for information about all its accounts.
Colwell cites the control aspects as most important and notes that prior to adopting eBAM, there were discrepancies between the company’s records and the bank’s. “This ties it up into a neat bundle and ensures at all times the bank’s back office system matches our system,” she said.
With just five USI employees authorized to use the eBAM system, “from a control standpoint and a fraudulent account type standpoint, there’s no question in our mind that it’s much more secure,” she said.
There are also time savings, since once an eBAM message is sent, the company gets an acknowledgment that the message has been received by the bank, followed by a confirmation once the task is accomplished. “We’re not continuously placing phone calls to the bank to find out, nor do they have to call us,” she said.
Scioli said the complexities involved in getting eBAM fully functional include such issues as the legality of opening a bank account without a signed paper document. In many countries, “the banks are fighting the battle of, ‘It’s not a wet-ink signature; it’s signed digitally, and that’s just as good,’” he said.
When it comes to technology, Scioli cited limits on the channels companies can use to deploy eBAM messages, with some banks offering bank account management via their Web portals but not accepting other messages, or accepting SWIFTNet but not host-to-host connections. “The connectivity issues are slowing adoption to some extent,” he said.
“Version one was literally the first version, and we didn’t get it quite right, which is why we ended up writing version two,” Scioli said, but added that software vendors and banks have not begun to work with the new version.
At the same time, a group of banks, software companies, and corporates has been working to harmonize the elements of the messages, and that effort is also in its second phase.
As a result of that work, the standard “is at a point where it fully supports implementation,” Scioli said, adding that as a result, “in the next year or so, it’s going to get that snowball rolling down the hill.”
Anand Mitra, a director in the treasury and trade solutions division of Citi’s Institutional Clients Group, cited the challenge of harmonizing standards for the ISO messages across banks and countries as a factor slowing the progress of a multibank eBAM solution, particularly standards around the documentation that’s required to open bank accounts.
Mitra noted that requirements for such documentation vary from country to country.
“What goes along with the message to a given bank [to open an account], all that information still has to be harmonized, and that will take time,” he said.
Given that challenge, Citi expects proprietary bank account management products to develop faster than multibank products, he said. So it is aggressively developing its proprietary bank account management product, which clients access via the bank’s Web portal.
Citi now has a growing number of large corporates, with thousands of bank accounts, using that solution across 60 of the 90 countries in which Citi Treasury and Trade Solutions operates. The bank is also working with three of its corporate customers on going live on XML eBAM.
Impetus from FBAR
While regulations like Basel III and Dodd-Frank are creating work for banks that interferes with eBAM efforts, another regulation is creating an impetus for corporates to adopt some form of bank account management.
Employees of a U.S. company who have authority over the organization’s foreign bank accounts are now required to file a Foreign Bank Account Report, or FBAR, with the U.S. Treasury’s Financial Crimes Enforcement Network; companies must provide the employees with the information they need to file. Companies that don’t use some sort of system for bank account management may have a hard time coming up with that information.
“The number-one thing that is selling systems for us right now is FBAR,” Gill said. “That’s the main driver in bank account management, not eBAM.”
FBAR has made it important for companies to ensure that their information about bank accounts matches the bank’s records, said J.P. Morgan’s Solimine. The current process in which a corporate sends a free-form letter to its bank to request a change in signing authority can lead to disparities.
“Things can get misinterpreted, things can get lost in the mail; there are a lot of things that can go wrong to get the records out of sync,” he said. “At the end of the day, when you have a structured request from corporate to the bank, and a structured response in return, the possibility of those records getting out of sync is greatly diminished.”
Craig Jeffery, managing director of Strategic Treasurer in Atlanta, which works with companies on FBAR compliance and bank account management, said the FBAR requirements have underscored companies’ shortcomings around bank account management.
“The fact is that many organizations are poorly prepared,” said Jeffery, pictured at left. “It’s very clear that there is a huge number of companies that are having a really difficult time managing their bank accounts properly.”
A annual survey of mostly large companies conducted by Strategic Treasurer found that as of 2015, 42% were handling bank account management on spreadsheets, while 46% were using some sort of system—either a treasury workstation system, a dedicated bank account management solution, or a system developed in-house. The rest were relying on paper-based records or files.
“If you have 10 bank accounts, a spreadsheet can work fine,” Jeffery said. “But many organizations have seven or more banks globally and over 100 bank accounts. That’s challenging to manage on a homegrown system or a spreadsheet.”
The survey also asked respondents to assess how well they’re handling bank account management. The portion picking the most upbeat assessment, “well-controlled,” slipped from 28% in 2014 to 21% in 2015, and Jeffery put the blame on FBAR.
“This has required them to go through their bank account data more rigorously,” he said. “They’re finding more challenges and problems, and that’s giving us a more realistic assessment.”
While the FBAR requirements seem to be generating demand for bank account management, minus the electronic messaging components of eBAM, companies that have done the work to implement BAM are in good shape to move on to eBAM.
And as eBAM adoption picks up, it could pave the way to more automation of bank account management processes.
Promise of Additional Automation
Scioli said he’s seen increasing customer interest in automating the back end of the process. Currently, a company that sends its bank a letter requesting a change eventually gets the letter back with some kind of notation showing that the bank did as requested, he said. “With eBAM, I get a report with the particulars of the account, and it shows me they did what I wanted them to do.”
Scioli said e5’s eBAM module takes that report and compares it with the record of the company’s request in the database to be sure they match.
“The ability to do it automatically on receipt of the messages is important,” he said. “Having disconnects between what I think I told the bank to do and what the bank has actually done—those differences have been very painful and tend to be a recurring problem in the communications between companies and banks.”
On the bank side, Solimine said eBAM makes it possible for banks to automate more of their processes. For example, J.P. Morgan has come up with what it calls an eForm, which corporate customers can attach to an account opening message and use to specify the products and services they want on the new account, such as ACH debit block or positive pay.
While the bank uses the XML account-opening message to trigger automated processing that opens the account, the attached eForm detailing services and products “allows us to do an automated interface to some of the other product systems as well,” said Solimine, pictured at right.
Companies can save the eForm and reuse it as a template if they open similar bank accounts in the future, he said.
From the bank’s perspective, getting all the information at once eliminates the need to call the company to get the rest of the information about the account. It enables the bank to improve its internal processes.
“It allows us to now create a consistent process across channels,” Solimine said. “Whether the request came in through SWIFT or one of our host-to-host channels or through a portal, we can process the request in the same way. That is the power of consistent data.”
For banks, “there’s tremendous ROI in improving the efficiency of account processes,” he added. “And the more of our customers that engage in the process, the better the ROI.”
Solimine sees ways that banks can leverage eBAM to facilitate adjacent processes down the road. They could use eBAM messages to gather additional data, like Know Your Customer information, or employ them to open other types of accounts, like custody accounts.
The companies that will have the biggest interest in eBAM are those with multiple banking relationships, said Kyriba’s Stark.
“Having multiple bank accounts at multiple banks is one of the first criteria,” he said. “That heightens the need to ensure that everything is centralized.” Stark noted that the more accounts a company has, the more pain it can suffer from the manual processes involved, as well as from having to log into multiple banks’ portals to get things done.
The frequency with which a company opens and closes bank accounts is another factor, he said. “Those that are multinational, those that are somewhat decentralized—where it’s not just the treasury group of three or four people with signatory authority, perhaps those privileges are spread out over a larger audience—that’s where you’re going to see more demand.”
While the pace of eBAM adoption hasn’t lived up to some early, optimistic projections, observers note that it’s just the latest in a line of treasury improvements that have taken more time than expected to get up and running.
“It’s the same thing with the international bank fee statements, the same thing with the adoption of AFP codes,” Gill said. “In the end, these corporate-to-banking communications schemes always end up taking longer than they should.”
Solimine said eBAM efforts are “starting to build momentum.” He described the technology as “an inevitability,” noting all the sophisticated financial technology that has evolved and all the chores that people can now accomplish electronically. “And somehow to open a bank account, I still need a piece of paper,” Solimine said. “It doesn’t compute.”