The treasurer’s responsibilities have broadened considerably in the wake of the financial crisis. But while many traditional treasury duties have increased in relative importance, recent advancements in technology have automated much of the work, freeing up more time for the treasurer to provide strategic insight to other executives within business, in particular the CFO.
There is one area which remains an exception. Despite strong demand for an electronic solution, the administration of corporate bank accounts has remained rooted in manual, paper-based procedures.
Cutting out the paperwork
At present, many of the routine processes treasurers undertake – the opening, closing and managing of global bank accounts – involve much manual input. It can be time-consuming, labour intensive and, above all, inefficient. Documents are printed, signed, scanned, mailed and filed, before being double-checked for accuracy on a separate data-tracking sheet. Then the process begins all over again for a different account in another jurisdiction, governed by different laws and regulations. “We seem to be doing the same things over and over,” says Jackie White, EMEA Banking Manager at Xerox. Indeed, it must feel a little like the labour of Sisyphus.
Is there another way?
At present its availability is limited, but electronic bank account management (eBAM) promises to revolutionise these processes by allowing them to be carried out electronically in the future. It has not, however, caught on as quickly as some corporates would like. Treasury Today’s annual benchmarking studies revealed that in 2012 in both Europe and North America corporates using the technology remain a small minority, 11% and 15% respectively.
Interestingly, at the recent EuroFinance conference in Barcelona, the ‘Treasury Verdict’ polling session found that 18% of respondents were already using eBAM. Almost a quarter (24%) reported that they wanted eBAM, but weren’t being offered it by their banks, while 28% said that they wanted it but the current options don’t satisfy their needs. 30% on the other hand, stated that they didn’t need it.
Patricia Greenfield, Director Treasury Operations, AstraZeneca, said: “I want it and need it – it’s on the project list for 2014. We have people moving around the organisation a lot and sometimes the signatory card is not there when you need it. Therefore, it’s high up on the agenda for next year.”
Xerox is one of the many multinational companies (MNCs) interested in eBAM who are on the cusp of implementing a solution. In Europe, Xerox investigated SWIFT’s eBAM offering but ultimately decided that Citibank’s proprietary eBAM solution suited them better. They are Xerox’s primary cash management bank in EMEA and, given that many of the company’s accounts are with a single banking partner, using a single bank portal for eBAM was not considered to be an issue. In addition, most of the software and integration is already in place and they could be confident their signatory information is correct on the basis that they are using the bank’s database.
Things would have been very different using SWIFT, she explains. “If we are sending messages down a pipe which does not update at ours and the bank’s end at the same time, in the same way and with the same data, then we would all end up in a muddle. It would be like replacing one headache with another.”
Although White feels very positive about Citi’s eBAM solution, the company doesn’t plan to begin implementation until later in 2014. Proceeding immediately would have placed an enormous strain upon resources, she explains. It is not necessarily the software and testing that is difficult, it is the ‘housekeeping’ that needs to be done before a solution can be implemented. Signatories on a mandate have to be agreed with the bank, and with hundreds of accounts across the globe, this is an unavoidably time-consuming undertaking and one which we would be foolish to contemplate when the company, like most of its peers, is busy preparing for the 1st February 2014 deadline for migration to the Single Euro Payments Area (SEPA). Once the dust has settled from SEPA migration, the company will truly begin its eBAM project.
Building an eBAM for everyone
If, like Xerox, your company has one main bank for cash management in a particular region and that bank offers eBAM, then electronically managing your accounts in the near future is a real possibility. However, if your company has relationships with a significant number of different banks, then the prospects are less certain. Most industry experts agree that multi-bank eBAM is something that will be the standard at some point in the future. The problem is that these experts have been predicting the same for some time now and it seems as though with each year that passes the concept is hit by another setback.
Last year, it seemed the final technical hurdle had been overcome when SWIFT announced it had successfully piloted a mechanism called the eBAM Central Utility (ECU). The ECU was expected to resolve the problem of the different legal and documentation requirements in place across different jurisdictions.
It is easy to understand why legal and documentary requirements could undermine the value that a corporate would hope to derive from a multi-bank eBAM solution. In order to open up an account with a bank in the Ukraine, for example, a corporate would need to speak to somebody in that branch, or perhaps ask a colleague in a subsidiary to speak to the branch, in order to determine the documentation requirements. This unnecessarily protracted process is then likely to be repeated the next time, when a different corporate decides to open an account at that particular branch.
Corporates wanted something better, and with the ECU it looked like they might get just that. To address the problem, the ECU was intended to operate as a database for storing all the necessary bank- and country-specific account information, allowing corporates to know in advance the different documents required by banks across the globe. This, it was hoped, would ensure that all messages between treasuries and banks comply with the correct rules and guidelines, thereby accelerating the flow of information.
Disappointingly, for some corporates, this was not to be. In October 2012, speaking exclusively to Treasury Today, SWIFT confirmed that development of the ECU had been put on ice. The problem was that for a project of this nature, SWIFT required the co-operation of a majority of the large cash management banks; outside of North America this was, for reasons that have yet to be revealed, not forthcoming.
Since then, SWIFT has been at pains to downplay the importance of the ECU to advancing eBAM adoption amongst corporate treasurers. Andre Casterman, Head of Corporate and Supply Chain Markets at SWIFT, does not believe that the decision to limit SWIFT’s role in the delivery of standards and the messaging for eBAM will be fatal to the development of multi-bank eBAM. Others will surely take over from where SWIFT left off. “I think that those corporates who want a multi-bank solution will be able to get that functionality from established vendors, such as SunGard, in the future,” he says.
Recent developments do appear to substantiate Casterman’s assertion. Weiland, now a part of Fiserv, already has one client – a large insurance company – in production with one of its banks and in test with two others. “Last year, the only companies doing eBAM were those using the single bank portals – but that’s not really what I call eBAM,” says Dan Gill, Senior Vice President of Weiland Corporate Solutions.
Through BAweb, the bank account management application provided by Fiserv, corporates can send and receive messages over the SWIFT network to any of the banks which are capable of sending and receiving eBAM messages. Although, Fiserv’s offering is still in the pre-production pilot stage, it does provide the clearest indication yet that multi-bank eBAM is beginning to become a reality. The only snag is that, at present, only three big US-based banks have this capability; many outside of North America have made very little progress on developing such functionality.
Once the remaining banks are able to offer fully developed eBAM solutions to customers, treasury management systems (TMS) vendors, such as cloud-based platform provider Kyriba, are poised for a surge in enquiries about eBAM from their corporate customers. Bob Stark, Vice President of Strategy at Kyriba, adds to Casterman’s assertions that SWIFT’s withdrawal of the ECU will not act as a damper on corporate demand once they begin to understand that multi-bank eBAM is achievable without it.
“As long as you have the ability to connect to all of your different banks – that is all you need,” says Stark. “The difficulty we are having at the moment is that many banks have merely been developing their own solutions and have not felt it necessary to connect to the outside world. But that is the main thing that a vendor like us is waiting on – for it to be more widely available and move beyond a pilot phase.”
Gill is also convinced that the various technicalities of eBAM have mostly been resolved. All that is left to do now, he says, is to convince more banks across the globe to come on board with the project. And to this end, he says, a lot of progress is being made.
Recently, the three US banks involved in the eBAM project from the start, came together with SWIFT and a selection of software vendors to form the CGI eBAM Working Group, with the objective of promoting eBAM globally and encouraging adoption across. Through this group Gill hopes that more banks will be encouraged to come on board and, once that stage has been reached, eBAM will really begin to take off.
“We are going to see more banks working together to drum up industry collaboration. We’ve been a big part of that and we are very supportive of it. So even though the ECU is no longer there, there is still a lot of work being done to drive eBAM forward from a collaboration perspective.
“It’s a marathon, not a sprint,” says Tom Durkin, Global Head of Integrated Channel Solutions, at Bank of America Merrill Lynch (BofAML). The cancellation of the ECU does represent a set-back for multi-bank eBAM, he says, but not one of a technological nature. The real issue was that it concerned corporates who believed that the utility was essential to the development of a multi-bank eBAM solution.
“We are having a lot more dialogue with corporates than we had a year ago. I think corporates are now taking a broader view of all their systems and that is slowing uptake a little. Essentially they are realising that there are many things they need to improve on before they begin to implement eBAM – their data repository, account database, signer database, etc – and so it creates a bigger project to focus on.
“However, I think that is appropriate,” he adds. “It is important for clients to get the foundations in line first, and that is what we have been advising our clients.”
2014: the year of eBAM?
After so many false dawns, corporates might understandably feel sceptical about pronouncements heralding the imminent arrival of eBAM as a widely used, off-the-shelf solution. Nevertheless, there is a growing sense now that 2014 could be the floodgate moment. In Europe, there is anecdotal evidence to suggest that the resource constraints Durkin speaks of have been exacerbated, as Xerox explained, by the looming deadline for migration to SEPA. Once the February deadline is out of the way and corporates have finally managed to put their taxing migration projects to bed, one would therefore expect interest in eBAM to begin to intensify.
In recent weeks, the three big banks with existing eBAM solutions –
have all been ramping up their offerings.
As recently as October, Citi announced it has expanded its eBAM service footprint to 55 countries across North America, EMEA and Asia Pacific. Evidently this is good news for companies such as Xerox, to whom a proprietary portal solution appeals, as these companies will now be able to bring the benefits of eBAM to a majority of their global banking customers.
However, as we have seen, the future prospects for multi-bank eBAM hinge on the willingness of the rest of the global banking sector join these three frontrunners in establishing the capability. Until now, many organisations have been reluctant to do so, perhaps on the basis that the technology still requires further developing.
Given all the previous disappointments it is still too early to declare with any confidence that 2014 will be the year eBAM arrives. But now, with all of the standards and infrastructure in place and with corporate interest stronger than ever, one could argue that the time is right for the remaining large cash management banks to begin jointly planning the transition.