Most medium to large companies use an average of six cash management banks, within this average about 30% use 6 or fewer, 40% use 7-20, and 30% use 21 or more. The number of bank accounts managed varies from a less than 50 to 100s or even 1,000s. This involves collecting and managing a vast amount of data describing the details of each bank account and controlling the delegation of authority to authorize financial transactions.

Bank account management is a huge task. Companies use very different methods ranging from: small businesses using spreadsheets and e-mail, mid-sized corporates relying on bank work stations and small treasury management systems (TMS) + adhoc systems to centralise and manage their 3-7 banks and 25-100 accounts, and large corporates who use fully integrated TMS and some form of dedicated bank account management system.

Any organization with more than 100 bank accounts needs a formal framework, policy and management processes for: 1) bank account reduction, and 2) overall managment of banks and accounts.

Bank and Bank Account Reduction Policy
Each bank relationship and each bank account costs time and money to manage and administer. The number of banks and accounts should, wherever practical and the counter party risk is acceptable, be minimised. Many corporate treasury departments have had a bank reduction programme for many years, but since the bank crisis in 2008, some departments have been increasing the number of banks to spread their counter-party financial and operational risk. The need to reduce the number of bank accounts remains. One or two bank accounts per business units is a useful objective.

What is Required
Opening bank accounts is difficult. It can take many days, if not weeks and sometimes months to set up an account due to the complexity and lack of standards for bank documentation and processes, the lack of identity policies, and the need for the paper documents to be 'wet' signed by many different parties. A new approach is needed.

Banks, suppliers and companies are finally developing the standards and infrastructure for automating the whole process; this is called eBAM - electronic Bank Account Management. Much of the communication process would go through SWIFT.

Source & Copyright©2012 -  SWIFT

There are five key elements in eBAM as figure below shows.
 

Source & Copyright©2011 - IdenTrust

To achieve this level of STP in bank account management requires developments in four areas:

• communication between all parties, much of which is available today.
• world-wide adoption of digital signatures, so that digitally signed documents can be sent between the banks and their corporate customers.
• standard instructions for all the key processes.
• electronic standards for all the bank management documents.

For companies, eBAM will provide full control of bank account relationship management; streamline account opening and maintenance, including managing complex, dispersed bank account and signatory information and pre-populating account forms for review and completion; maintenance of signer lists and removal of the risks of wet signatures; audit trail of account requests and transactions. It will make the whole process easier, more efficient, faster and more secure, but much development is still required.

Standards Development and Progress
A whole set eBAM messages - for the end-to-end processes, the controls and workflows for account signer and mandate management inside and between a bank and its corporate customer - is under development. The first version of these standards was published in 2007. SWIFT has now joined the process and has defined a set of 15 XML messages to automate BAM messages. These schemes are going to be included in the UNIFI (ISO 20022) standards by the ISO Standards Evaluation Group.

The required Digital Identity systems and services for identifying the signatories on the documents are slowly being rolled out world-wide. (See: ID Systems & Services, Fraud Prevention.)

The delegation of authority to authorise payments and financial transactions is a complex problem. Systems are needed to record and manage the authorities and transaction limits. The authority management system also needs to keep track of changing responsibilities and when people leave the company. It is essential that the eBAM systems are linked directly to the Human Resources department's systems and data.

A problem
One of the problems hampering the establishment of a global eBAM system is that countries differ greatly in their legal and documentation requirements and so do the banks. To address this problem SWIFT are promoting their eBAM Central Utility (ECU) which they piloted in 2011. The ECU operates a global database for storing all the necessary bank and country-specific account information, allowing corporates to check in advance the different documents required. This will ensure that all messages between treasuries and banks comply with the agreed rules and requirements. SWIFT hope to go into production with this service in mid-2013. This could kick-start the spread of eBAM.

Live Users
The vision - the replacement of all paper-based bank account management processes with electronic straight through processing systems - is clear, but not easy to deliver. At present, only a few banks have tested eBAM and have live services. In addition, digital signatures are only used by a small number of corporates and banks world-wide.

eBAM is only really happening within large bank groups, which have standardized their automated account opening and account management and in the biggest companies. General, widespread implementation of eBAM is likely to take many years.

Implementing eBAM
There are three types of corporate eBAM solution available:

• bank-centric solutions in which the company connects to a single, proprietary bank-owned and bank-hosted system
• corporate-centric solutions in which the company develops or acquires a system for bank account management and connection to their banks
• outsourced hub solutions in which banks and companies use a common hub to provide full inter-operability and a central repository for all bank account information and management.

Large corporate treasury departments have been the early movers in developing eBAM, choosing either a bank centric or a corporate-centric solutions.

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