By Bryan Richardson
The system makes strides via SWIFT, but some aspects of overseas accounts still remain atavistic irritants.
Sometimes highly anticipated technology solutions can seem to take forever to get to market. Such is the case with eBAM (Electronic Bank Account Management), the much hoped-for solution to the archaically manual and paper-intensive processes associated with opening, maintaining and closing bank accounts.
Regulatory burdens combined with poorly developed infrastructure in many countries, contributes to the overall burden of bank account management. Anecdotal tales of opening bank accounts in some countries indicate it can take as long as a year. Ironically, the success of electronic banking, which has produced extensive improvements in efficiency, has unfortunately not been accompanied by improvements in-bank documentation processes.
Finally, and without much fanfare yet, it looks as though the breakthrough has arrived. Dated January, 2010, the SWIFT Solution Overview for eBAM can be found in the “Resource Centre” of the SWIFT for Corporates website. The solution was devised by a consortium of banks, corporates, and technology companies working together with SWIFT since 2007 to develop a messaging infrastructure within the SWIFT environment to bring paperless automation to bank account management. The effort was initiated by the treasury team at Royal Dutch Shell, which wanted to get at a solution to this “royal” pain.
NO PILOT ERROR
Over the summer of 2009 the group conducted three pilots that included different combinations of banks, corporates and technology companies. The pilots tested solutions for creating new signature mandates, canceling signature mandates and replacing a signatory. The testing also included the use of digital signing using technology provided by IdenTrust and SWIFT, a key component of any automated paperless solution.
The pilots were completed in September, 2009 and brought the project to the important step of applying for ISO certification for the tested components of the solution, which was received early this year. This allows the message solutions to be incorporated into the ISO 20022 XML communication format already in use by banks and corporates.
There is significant motivation to derive a solution as both banks and corporates suffer from the current burdensome process. According to a September, 2009 survey conducted jointly by Pega Systems and Finextra (two stakeholders in the improved process), nearly two-thirds of banks said they could reduce associated operational costs by 31 percent or more with an eBAM solution. The same survey reported that for corporates, nearly 50 percent have four or more staff dedicated to bank account management. Indeed, in a recent meeting of the Global Cash and Banking Group, sponsored by Deutsche Bank, numerous members reported having created full-time positions for no other purpose than to simply focus on and organize the bank account management process. As John Cowart, Senior Product Manager in Global Transaction Banking at Deutsche Bank pointed out, “There is broader impact as additional resources outside of treasury are consumed by legal, account signers and other parts of the process.”
The benefits to SWIFT’s eBAM solution are pretty simple:
- Reduce the time total to effect changes
- Reduce costs for banks and corporates
- Improve customer satisfaction
- Improve STP and traceability
BANKING ON CHANGE
While there are many elements to bank account management, the objective of the pilot group was to address the most taxing, starting with account maintenance, but easiest to fix. However, the solution goes on to address the basic processes of opening, maintaining and closing.
SWIFT has developed 15 different messages to be used in this activity which includes such features as “Account Request Acknowledgement” and “Account Report.” This reporting message contains all bank account information and guarantees the corporate that the initial request is fully processed by the bank and that the account is active. Of course, other issues remain. Mr. Cowart says, “Even a basic account closing instruction raises issues around how to address remaining balances, pooling structures and other services possibly tied to the account.”
It is unrealistic to think that all paper is eliminated from this process and all parties in the pilot acknowledge this. Therefore SWIFT included the use of their File Act messaging service which allows the use of XML messaging but can also include file attachments. The signing of these documents is accomplished through the use of digital signatures . The Resource Centre on the SWIFT website also includes an implementation guide for eBAM.
WAITING ON THE 21ST CENTURY
There are still a few catches. First, SWIFT has developed the solution but most banks have not yet incorporated it into their operation. At the time of the Pega Systems / Finextra survey last September only 13 banks worldwide were involved in developing the solution.
Second, the SWIFT solution is for “existing customer only.” The new customer requirements around Know Your Customer (KYC) are not included in the SWIFT process. Interestingly, 44 percent of corporate respondents in the Pega Systems/Finextra survey said they would consider switching banks for better account management solutions. So, if you happen to be one of those, just know you have to get past the KYC hurdle first.