Despite the technology to implement BAM and eBAM being readily available throughout Asia, the regulatory environment in many nations is a key factor hindering uptake. The regulators often still require you to produce physical paperwork and documentation which offsets many of the benefits that eBAM can offer, such as increased connectivity with banks and improved straight through processing (STP). Treasury departments in these countries will therefore be left with a two tier system – part completed through eBAM and part completed manually. The lack of efficiencies in this kind of solution make the integration cost harder to justify both in monetary and labour terms.
When implementing an eBAM solution, it is desirable for a treasury department to obtain 100% coverage over their bank accounts. This however is not possible in Asia due to the lack of support for eBAM solutions from regional banks. For example, many regional banks in Asia cannot support SWIFT connectivity and therefore if you have accounts with one or a number of these banks, only part of the standardisation and improved STP that eBAM brings will be achieved.
Treasury departments in Asia also often have greater priorities to deal with than eBAM. This, in part, explains its slower uptake in the region. For example, at AkzoNobel, we have previously prioritised the implementation of regional cash management structures and trade finance platforms over eBAM.
The implementation of eBAM is now on our agenda for 2014, however. A recent review of the company’s cash management mandates globally means that this is a good time to begin implementing the technology. The project is being led out of our headquarters in the Netherlands. The South East Asia Pacific hub, based in Singapore, will provide a supportive role to the overall project, ensuring that the requirements specific to Asia are captured in the scope of the project.
The mature regulatory environment in Singapore means that we can avoid many of the issues eBAM faces throughout Asia and once implemented it will allow us to capture data from our transaction banking infrastructure with increased accuracy, and increased efficiency.
Therefore, while implementation of BAM and eBAM is slow in many Asian countries due to the regulatory challenges it poses, I do believe that in less hostile regulatory environments such as Singapore it will become increasingly popular as treasury departments mature and their priorities change.
Rationalising bank accounts and bank relationships is a major focus for treasurers across the region. With this trend of rationalisation poised to become more common in Asia Pacific, the question will inevitably turn to the adoption of automated bank account management (BAM).
While the interest is clearly there in Asia Pacific, there remains a diverse range of challenges hindering widespread adoption of BAM and electronic bank account management (eBAM). Currently, automated BAM is considered by treasurers as a value-add rather than a must-have. Significantly, 78% of respondents to our research have said they don’t plan to implement automated BAM solutions.
There are reasons driving this behaviour. Firstly there is a lack of awareness within corporate treasury of the benefits of an automated BAM solution. The services and solutions provided by banks in this space are also holding back adoption. Ultimately, this lack of awareness makes internal account management teams resist a move to an automated BAM solution.
On the eBAM front, slower than expected adoption is largely a regulatory-based issue. Given the diversity of Asia Pacific and gaps in market sophistication, it should not come as a surprise that only three markets are fully ready for eBAM – Australia, Hong Kong and Singapore.
Regulations aside, widespread support of eBAM from regional and local banks is lukewarm at best, with global banks championing eBAM adoption. One of the major roadblocks is that corporate clients need to have two different processes – electronic interfaces with banks that support eBAM and manual interfaces with banks that do not support eBAM. This dichotomy makes it difficult to realise the full benefits of automated process using eBAM.
In our opinion, for eBAM to work, there has to be a widespread adoption of digital signatures, which is currently lacking due to the legal framework not favouring digital signature over wet signatures. Only Australia, Hong Kong and Singapore have passed legislation to support digital signatures.
In addition, many countries require an original or certified true copy which therefore makes the corporate duplicate the process by having to send electronic versions followed by physical copies. The promised automation of eBAM is not achieved in this case and the objective of digitalising the account management processes is lost.
There are other major considerations. For instance, adoption of multi-bank digital security and digital identification infrastructures like SWIFT 3Skey are not currently widespread. Furthermore, the integration of eBAM or BAM solutions to back office systems like Enterprise Resource Planning (ERP), Treasury Management Systems (TMS) and Human Resources systems (HR) is still a hurdle and the cost of integration is high.
For BAM and eBAM adoption to become more popular in Asia Pacific, awareness has to be created through customer education and broader support from in-country regulatory bodies. Corporates can start with the adoption of BAM by establishing a central data repository which supports account information, signer details, mandates and contracts. This will ensure a smoother migration to eBAM once the legal framework matures in Asia Pacific. Corporates, banks, SWIFT, technology vendors and consulting firms all have a part to play throughout this process.
One of the major factors hindering greater use of BAM and eBAM in Asia is the slow uptake in the United States and Western Europe. BAM and eBAM are only just starting to make significant progress in these developed markets, where only a few steps need to be taken for corporates to implement the technology. Therefore in Asia, where it is often significantly harder to implement, the market is monitoring the progress of BAM and eBAM before taking any substantial steps. I predict once BAM and eBAM is widely used in the United States and Western Europe it will become increasingly popular in Asia as MNCs push the technology on their subsidiaries.
Regulatory issues are also proving a major stumbling block for the growth of BAM and eBAM in Asia. The strict rules surrounding banking in the region make it very difficult for a corporate to use eBAM. For example, it is sometimes the case that you need a physical presence at the bank to open or close an account and this is something that cannot be digitised. The uptake of eBAM in many Asian countries will depend on the evolution of the regulatory environment over time, to a point of being comfortable with electronic delivery of information.
Currently BAM and eBAM are primarily seen as efficiency tools. However the main benefit, for eBAM especially, derives from its ability to improve a company’s controlling and audit processes. Matching a company’s records to the bank’s records is presently a challenge in all geographies. eBAM allows a company to accurately match and manage its bank account records, improving this process. Once the auditors begin to see this high level of accuracy consistently from companies who use eBAM it will become the de facto standard. Therefore if you are not communicating through eBAM it will be seen as a deficiency by the auditors and you will be penalised. Once this begins to happen, BAM and eBAM become more than efficiency tools and will become a must for treasury departments in Asia and worldwide.
The software that is required to utilise BAM and eBAM is already widely available in the Asia Pacific region and the global banks are attempting to drive the project forward. However, regional banks in the region are yet to put their weight behind BAM and eBAM and that will be required for it to fully take off. These banks will ultimately respond to demand, so corporates in the region who have an interest in using these technologies need to start putting pressure on their regional banks to support them.
In five years’ time, I see BAM and eBAM becoming increasingly popular in Asia. Many major US and Western European companies will be using BAM and eBAM which will subsequently drive this further into the Asia Pacific region. In turn, this should trigger the banks to support the technology and help towards a maturing of the regulatory environment.
“China’s updated company law came into effect on 1st March 2014. What are the main changes that have been made and what do treasurers need to know about these amendments?”
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