Published: August 01, 2010
Bank Account Management (BAM) and communicating with banks is a major challenge faced by every corporation with bank accounts. Automated programmes along with SWIFT eBAM stand poised to change the way we talk with our banks, revolutionising bank account management in much the same way email changed the concept of mail forever.
Corporate banking relationships have never been more complex than they are today. As corporations struggle with the idea of reducing their bank account inventory while simultaneously managing counterparty risk and meeting controls requirements, the concept of Bank Account Management (BAM) has been brought to the forefront of the international treasury community.
Automated Bank Account Management software applications help by providing a highly structured and controlled methodology for a company to manage its bank accounts.
Properly accounting for and controlling bank accounts and their associated legal entities, signers, the employees that have authorities over those accounts, bank policies and practices, mailing addresses, contact information, as well as audit and legal requirements is a daunting task. The days of keeping your list of bank accounts in a spreadsheet or a simple database have passed. Managing all of the data related to your company’s bank accounts is a difficult task on its own, trying to communicate this information with your banks and keep it all in sync is nearly impossible. Countless letters, spreadsheets, and phone calls are exchanged in a never-ending attempt to accomplish one single goal: synchronisation of your company’s bank account data with its banks. Automated Bank Account Management software applications help by providing a highly structured and controlled methodology for a company to manage its bank accounts. They even make valiant attempts at providing tools to streamline communications with banks. Until a standard method of communicating bank account management information is put in place, companies will have a difficult time asserting that they have effective controls around their inventory of accounts.
The recently released SWIFT eBAM message formats provide both the standardised format and communications capabilities necessary to communicate account management information between companies and their banks. SWIFT eBAM messaging consists of 15 specifically designed XML based file formats that allow companies and banks to conduct five common bank account management conversations. These five types of conversation allow you to perform virtually all bank account management tasks electronically:
These five types of conversation allow us to perform virtually all bank account management tasks electronically. Most eBAM conversations begin with a request to a particular bank through the company’s bank account management system. Each of the five conversations begins with a conversation starter message that is generated by the system and delivered to the addressed bank electronically (preferably through the highly secure SWIFT network). These conversation starters begin a back and forth of automated electronic messages between the company and the bank that confirm receipt of each message, allow for the request of additional information, and finally confirm that the requested action has been taken. The standardised format and electronic communications remove many of the obstacles posed by traditional manual communication methods. [[[PAGE]]]
In order for eBAM messaging to work, there are five critical factors that need to be in place:
1. A company with the desire to electronically manage the accounts it has at its banks
The benefits of eBAM are clear: faster, more controlled corporate-bank communications that save treasurers time, money, and headaches. No more waiting for the mail, maintaining customised communication protocols, or losing track of that account request you faxed to your bank weeks ago – instead, everything happens quickly, electronically, and in a standard format. Plus, with your account data electronified, you can easily centralise your account data, audit and track bank conversations, and implement a bullet-proof control framework.
2. A system within the company that is capable of starting eBAM conversations with banks and acting on responses
With the release and ISO approval of the SWIFT eBAM message formats, software systems are becoming available that will allow corporations to start and respond to eBAM conversations with their banks. The majority of these systems are upgraded Bank Account Management solutions that already have a database of account information to work with.
3. A bank capable of receiving, internally routing, and responding to the information contained within eBAM messages
A number of banks have outlined plans for eBAM. Some are planning robust systems that will allow full straight-through processing of eBAM requests. Others are implementing systems that are only inward facing, requiring unique logins, while still others are asking “what is eBAM?” Like many treasury innovations in the past 20 years, corporate treasury professionals will have to take the lead in convincing their banks to fully implement effective eBAM solutions.
4. A communication channel to deliver eBAM messages back and forth between the company and the bank
The most logical communications channel between banks and corporates is the SWIFT network itself. Now that corporates can join SWIFT and send messages to their banks on a proven high security channel, it will almost certainly become the de facto communications channel for eBAM conversations. Whether accessed directly by a corporation or through a service bureau like Axletree possibly using integration tools provided by a company like Trellis, the SWIFT corporate access programme provides the perfect communications tool for eBAM conversations.
5. A method of trust between the company and the bank to ensure that the messages going back and forth are authentic, authorised, and unaltered
eBAM uses digital signatures to ensure that documents and requests sent back and forth are actually from the person claiming to have sent them, they are properly authorised, and the messages have not been altered in any way. Most of us in treasury are familiar with digital signatures and have the key FOBs to prove it.
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This is because many digital signature methods require a separate hardware or software device for each relationship – the equivalent of having separate pens for each bank. Going forward, eBAM will require a more efficient solution. Currently, IdenTrust takes a unique approach from other certificate authorities that provide digital certificates for electronic signing. IdenTrust manages the overall service while each subscribing bank issues the IdenTrust certificates and devices. Once a company receives its certificate device from one IdenTrust bank, that same device can be used for all of the company’s banks that subscribe to the IdenTrust service. This allows the users at a company to have only one token that provides authentication, authorisation, and non-repudiation for a variety of communications with their banks, including eBAM conversations.
eBAM is here. The standard is approved, the software is becoming available, and the network and authentication methods are established. All that remains to be seen is whether banks will adopt the standard so that their corporate customers can realise its benefits. Treasury professionals have a great opportunity to influence their banking partners – you need to have a conversation with your bank.
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