The challenge
The company’s governance structure required an independent third party to act as custodian for the metals and any customer funds safeguarded, either for monies deposited in advance of a transaction or pending settlement for a purchase. e-Bullion has partnered with one of India’s largest vault service providers, which is also one of the key accredited vaults for MCX India1.
The solution
The solution requires an escrow mechanism between EBPL, the vaulting company, and the bank. Their digital platform was designed to allow its customers to also dispose of metals positions and withdraw realised funds, and the bank needed to distinguish between any funds earmarked for purchase of metals by its customers, from those available to their customers. Payments to support metals purchases are collected on a real-time basis and includes workflow APIs between the bank and e-Bullion’s platform so instantly provide customer funds reporting and transaction (and account) reconciliation.
The escrow mechanism required multi-level authorisations to include the independent vaulting company as an authoriser for release of funds only after processing and confirming that the customer metal purchases has been deposited by e-Bullion into the vault.
The ability for the vaulting company to authorise such payments makes the settlement mechanism efficient as it has visibility of all metals’ monies paid-in/metals deposited by EBPL into each customer’s metal pool and therefore able to accurately determine the quantum of funds to be settled to EBPL for such sales. This removed the unnecessary layer of an additional third-party intermediary, making the solution design and processes instantaneous – and future-ready as and when blockchain-based ‘smart contracts’ become a reality in India.
Best practice and innovation
Understanding the challenges faced and requirements of e-Bullion, and to effectively address them, DBS provided a digital escrow solution integrated with both the company and its third-party vaulting partner by leveraging instant payment, and workflow APIs together with virtual accounts for unique customer identification. DBS also provided an ability to execute penny verification tests to allow the e-Bullion system to check new customer bank accounts by sending a one-rupee remittance to the account declared by the customer as per EBPL’s anti money laundering protocols.
Key benefits
- Process efficiencies, improved visibility and future proof solution:
- Reduced collection costs by virtue of same-day settlement.
- Payor identifications via DBS Virtual Account.
- Real-time intimation on the collection resulting in convenient reconciliation.
- Risk mitigated:
- Multiple access and authorisations for e-Bullion and their partner vaulting company on DBS IDEAL.
- The vaulting company is added as an authoriser for checking the metal and then ensuring release of funds.
- Penny verification feature ensures that accounts declared by end-customer are valid and legitimate.
DBS’ escrow solution not only fits the complex business requirements of e-Bullion, but also streamlines processes resulting in greater convenience for both the company and its customers. The reconciliation process is made simpler through the provision of virtual accounts, while end-customers can choose to pay using a variety of modes (UPI, credit/debit card and online banking).
“Multi-level authorisations and the penny verification feature helps to further mitigate risk by ensuring that there are controls against money laundering in place,” states Amar Shah, Principal.
