Operating in China can be extremely challenging for foreign banks, in particular when corporate clients are based in remote locations. We speak to Leo Yin about BNP Paribas’ effective multi-bank solution that allows the bank far greater reach across China and enables its clients to achieve visibility across their accounts. We also discuss the rise of the direct debit in China, as well as e-receipt account reconciliation.

How do you offer your clients accessibility to bank account services across China and how does this approach differ from your peers?

In China, the common challenge for multinational corporates is to gain better visibility and control over their accounts across different banks. Cash management providers, especially the international players, are putting tremendous efforts into positioning themselves as the overlay bank through improving accessibility and consolidating multiple banking channels. In this regard, BNP Paribas introduced its unique multi-bank solution (MBS) about two years ago. In essence, MBS congregates multiple banking channels into one single platform, allowing our clients to gain global visibility and full control of their accounts across different banks. Through MBS, our client can query directly its account information, manage the initiation and the authorisation of payment and concentrate its liquidity across multiple banking accounts with ease.

The difference from the market offering lies in the flexibility and scalability of MBS as well as the level of standardisation in account reporting and payment handling for all accounts across different banks, which in turn significantly help to improve client’s account reconciliation and even cash forecasting.

How does the MBS help corporates manage their risks better?

The basis of good cash management is to know where your cash lies. MBS gives corporates a complete view of their accounts across different banks, thus forming the fundamental foundation of good cash management. Through a single platform, clients maintain the same set of rules and enforce the management and control of accounts payable. Global visibility and centralised control also allow clients to respond rapidly to a liquidity need, thus improving treasury management.

From a technology perspective, BNP Paribas is fully responsible for the implementation, and continue to take care of the connectivity after implementation.

Could you explain a little more how the MBS improves visibility over the client’s cash?

From a multi-bank standpoint, all of the client’s account information will be routed through MBS, which is in turn delivered and displayed into Connexis, our web-based portal for the same ‘look and feel’. Traditional multi-bank channels offer MT940 and MT942 for which information timeliness depends on the frequency of MT942 updates. MBS retrieves information when available, making account reporting near to a real-time basis. Besides Connexis, MBS also offers data import/export and host-to-host connectivity, allowing the direct and seamless exchange of account information between corporate treasury system and MBS platform.

In a nutshell, MBS improves timeliness of information, standardises the reporting format of accounts across different banks, allows data to be downloaded for further processing and provides for host-to-host connectivity. Overall, it is a perfect solution for the corporate to improve visibility of its cash and cash forecasting.

How does the MBS allow corporates to take control of their accounts?

MBS provides a single platform for account management. The user profile, data rights and authorisation matrix can be centrally managed and controlled, thus reducing the risk associated with handling multiple banking channels. With a global visibility of accounts across different banks, the corporate has clear and updated account information on hand and can mobilise its liquidity rapidly.

MBS supports Chinese language, which is essential in China. Foreign MNC’s treasury systems are in Roman characters. MBS allows the dual existence of Chinese characters and Roman characters. This answers the need of MNC to maintain its global system while accommodating the need of Chinese language in China.

Aside from the MBS, BNP Paribas has also been investing time in its direct debit capabilities. How popular is the direct debit (DD) system in the country? Also, what are the regulatory restrictions surrounding direct debits?

In recent years, direct debit has increasingly become popular with corporates endeavouring to collect automatically and promptly. The advent of electronic direct debits has made a big difference. This has prompted a move from paper to electronic transactions and all major cities are now in the process of migration. In my opinion, the commercialisation of the direct debit in China makes sense for the whole business society now.

However, there are constraints. For example, foreign banks are not yet allowed to operate direct debits for tax payments. The rules and regulations are different across China. In Beijing, it seems that banks have to stick to the existing paper-based direct debit payments and there are no clear guidelines on electronic direct debit. These are real challenges for banks and their clients. We are endeavouring to organise meetings with the regulators to obtain clear guidance.

How can you help corporates to adopt direct debit in China?

As a direct member of CNAPS, we are fully equipped with direct debit collection and payment functions. We have also engaged regulators in continuous dialogues to better advise our clients on the adoption and implementation of direct debit in China. Coupling our capabilities and know-how, we can help corporate clients such as those in leasing and insurance businesses to set up an electronic direct debit collection regime according to their needs.

Can you explain how BNP Paribas’ e-receipt account reconciliation works?

Account reconciliation is becoming more and more important for most corporate clients. Improving your reconciliation depends on how comprehensive the information that you get from your payer’s bank is. In China, there are no standard practices that dictate that the payer’s bank must include all the information you have put in your payment instructions to execute the payment. Sometimes the information is truncated – either manually or through a system.

Indeed, the majority of corporates find that their collections information is not sufficient for them to reconcile efficiently. A number of international banks are looking at this, and we now have the solution – e-receipt account reconciliation.

In China, regulation stipulates that the payer’s bank must input the payer’s account number and pass it through the clearing system. We virtualise the account number to make it contain other data. We discuss with the client to determine the additional information they need to perform efficient reconciliation, for instance, vendor code plus invoice number or even contract number. Once the necessary information is determined, it will be pre-designed as part of the account number which can be shown in the payment instruction. This information cannot be truncated via clearing.

In turn upon receiving the incoming collection, related data will be then converted into the original information pre-designed for the client, thus helping to make reconciliation easier.

To capitalise on the advances we have made in this area, however, we have also been running education sessions with our clients to enable them to use the e-receipt account reconciliation system – to explain how they can manage their vendor codes and payment codes, for example.