Treasury Today Country Profiles in association with Citi

ebay

eBay Korea, Highly Commended, Judges’ Choice

Sung-Ah Sohn, J.P. Morgan collecting the award on behalf of eBay Korea

This nomination was submitted in the ‘One to Watch’ category but our judging panel felt it most worthy of the highly commended Judges’ Choice award due to its innovative nature. This impressive solution has greatly improved the company’s accounts receivables reconciliation process. The solution involves the use of the company’s banking partner’s nostro account held with a local bank. eBay Korea is the first company to implement this highly innovative and unique account structure in Korea with J.P. Morgan.

Photo of Sung-Ah Sohn, J.P. Morgan collecting the award on behalf of eBay Korea.

In Young Lee

Head of Finance

eBay Korea, operating primarily through the Gmarket brand, runs one of South Korea’s leading e-commerce marketplaces and online auction sites. It boasts more than ten million registered users and offers more than four million items for sale among some 37 product categories.

in partnership with

An enhanced accounts receivable solution using a bank nostro account

The challenge:

eBay Korea faced difficulties with maintaining a large number of collection accounts with multiple local banks to accommodate the requests of its customers. Customers in Korea often demand that their suppliers open bank accounts with their bank so they can save costs and enhance their relationships with their own banks. eBay Korea faced tremendous challenges, as it had to manage numerous accounts in addition to dealing with the different banking platforms, with difficulty in reconciliation often encountered.

The solution:

To reduce the number of accounts and better manage incoming receipts with increased efficiency, eBay Korea partnered with J.P. Morgan’s branch in Seoul to implement an enhanced Accounts Receivable (AR) reconciliation process, which enabled the company to receive payments without maintaining a local bank account by leveraging J.P. Morgan’s nostro account held with a local bank.

A bank account was opened under J.P. Morgan’s name with a local beneficiary bank and used as a nostro account to support a unique Virtual Collect transaction solution:

  • J.P. Morgan put host-to-host connectivity in place with the beneficiary bank to transfer funds collected from the beneficiary bank to eBay’s account held with J.P. Morgan.

  • eBay Korea was given Virtual Collect numbers required to link to J.P. Morgan’s nostro account opened with a local bank.

  • eBay Korea then assigned a unique Virtual Collect number to each customer and instructed them to use that number for their payments to eBay Korea. With the Virtual Collect number, eBay’s customers uses their assigned numbers whenever they make payments to eBay, by quoting their assigned Virtual Collect number as the beneficiary account number to their bank when giving payment instructions.

  • Incoming payments are credited to J.P. Morgan’s nostro account held with the beneficiary bank and J.P. Morgan sweeps the collected funds to eBay Korea’s account, which is held with J.P. Morgan’s branch in Seoul on a real-time basis.

  • J.P. Morgan provides web-based reporting portal to eBay Korea with the ability to view real-time collection information on a real-time basis.

eBay Korea currently maintains about 5,000 virtual reference numbers for a local Korean bank. Their average monthly volume and value is about 220 transactions and equivalent to about US$10m respectively. To meet the company’s needs, J.P. Morgan plans to include other local banks onto Virtual Collect.

This very practical and highly innovative, unique solution has enabled eBay to achieve world-class results in account consolidation and enhanced its efficiency tremendously.

Best practice and innovation:

eBay Korea leveraged a unique solution to resolve a challenge that has long ‘plagued’ many businesses in Korea that has created inefficiencies and increased costs. Other multinational companies in a similar position have not been able to overcome the difficulties of opening a multitude of accounts with several banks, in comparison to what eBay Korea has achieved.

eBay Korea is the first company to implement this highly innovative and unique account structure in Korea with J.P. Morgan.

As In Young Lee, Head of Finance explains, “eBay was not alone in Korea struggling to manage a multitude of accounts with several banks in the country. However, it is one of the first companies in the country, together with J.P. Morgan, to implement an innovative solution to resolve the difficulties caused by having multiple accounts.”

Key benefits:

  • Process efficiencies.

  • Cost savings.

  • Number of bank accounts rationalised.

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