Commercial banking is a relationship business that is paid for by custom pricing crafted by the big money center banks based on the size and needs of the world’s largest clients. The banks have been very careful over the years to prevent their large clients from viewing commercial bank services as a commodity. The secrecy of relationship pricing combined with marketing efforts from the bank to brand services as unique and special has turned bank bills into mysteries. A common identifier is needed to translate and compare services and pricing across banks. The AFP Code (whether US or Global) seeks to do just that.
Having a standardized code gives corporations the opportunity to generate reports, track volumes, classify services, calculate costs per item, perform analytics, and, most importantly, understand the services they are paying for across the industry – something that is virtually impossible to do with a textual description. The need for a common translator is clear but the adoption and application of the code by the banks correctly is the key to their usefulness. No matter which standard is adopted, banks must establish a clear process for ensuring consistency in their assignment of the AFP codes at the stage of adoption across all billing platforms. Just as important, however, is to ensure on an annual basis that the mapping is still relevant and that new services are mapped with the same care. Whether the process is outsourced or internalized through consistent training and internal efforts, the policies and procedures for the future need to be made now.
Global banks do not seek transparency any more than US banks, and many will wait to implement the codes until they receive pressure from their large corporate customers to do so. We are starting to see the fruit of the pressure today. Almost all banks that are currently providing BSB statements are also actively working on AFP Code mapping projects.
Why use the AFP Service Code instead of another?
When electronic account analysis statements (EDI 822) were first created in the US, the large corporations leading the charge approached the AFP (then known as the Treasury Management Association) for a standard unified billing code to facilitate automated reporting. To ensure adoption of the new standard code, ANSI required a “TMA code” to be assigned for each bank service included on the electronic statement.
Flash forward 30 years. Banks are implementing the Bank Services Billing (BSB) standards in either TWIST or ISO20022 format and they are looking for a standard billing code. The BSB format does not require a standard code, unlike the EDI822, nor does it specify which standard should be used. However, the CGI-MP (Common Group Implementation – Market Practice) SWIFT Workgroup 5 made of both corporations, vendors, and bank participants have mutually agreed earlier in 2017 to adopt the AFP Global Codes as the unified standard used in the BSB. Redbridge is currently leading the taskforce to update the 2013 codes to reflect the latest billing practices and current global market.
Corporations should continue to ask the banks for AFP Global or US Service Codes in their bank fee reporting. In order to unlock the value in the code, however, one will also need to take the time to understand the code definitions to truly maximize their benefit. Imbedded within the code is a wealth of information about banking services. Is this a maintenance charge or transaction based? A processing charge or an exception item? One truly can solve the mystery of bank billing if you learn to use the clues found in the codes.
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