Putting down the pen: how eBAM came about and what it means for corporates

Alexander Reinecke is senior vice president, business product management at Deutsche Bank

Arising out of developments in standardised messaging, eBAM is one step towards the future of more accessible, safer banking, writes Alexander Reinecke

For corporate treasuries, many of the processes around bank account management continue to be executed in traditional, paper-based methods – methods that restrict or hinder control, visibility, efficiency and risk-mitigation. The manual administration of several bank accounts, held with different banks, for all the far-flung subsidiaries of a group means that an up-to-date overview of data across the group is often impossible due to the decentralised nature of the corporate’s set-up and the lack of transparency around paper documentation. Furthermore, manual processes carry risks – of human error, fraud and oversight – and incur time and monetary costs, particularly in regard to maintaining accurate records of accounts and the process of opening and closing accounts; a more frequent action of large multinational companies.

Paper-based processes are not only time-consuming, inaccurate, and difficult to keep track of, often resulting in feedback loops, but they also resist clarity and visibility. A simple request – with regard to who has access to a bank account, whether previous employees’ access has been suspended, or the position, number and location of the corporate’s bank account structure – is at times challenging to answer.

Information flows to and from banks in one of two ways. First, it can be sent through the utilisation of proprietary online tools, provided by the individual bank. Alternatively, data can be transferred through the exchange of standardised messages. Standardised and integrated solutions that are compatible with multiple banks offer clear advantages over proprietary models – much like in the exchange of electronic payment data.

As a result, treasury management systems have developed to combine various necessities of bank account management. Key here has been the standardisation and digitisation allowed by advances such as the introduction of SEPA and moves to the ISO 20022 XML format, as well as the introduction of SWIFT FileAct. As well as enhancing control, these TMSs provide a framework for treasurers to make informed decisions; vital in their evolving role from cost-centres to value-creators.

So in response to the challenges of paper-based processing, and client demand for solutions to help them meet regulatory requirements, minimise internal fraud potential and optimise account management, electronic bank account management was introduced – meaning, specifically, the integration of instantaneous internal data exchange with all banking partners. Known as eBAM, this allows corporates to manage all of their bank accounts electronically in a secure and centralised manner with a complete overview and management of all banking relationships; easing the burden of compliance and reporting as well as improving efficiency and risk-management.

When SWIFT created the ISO 20022 acmt (Account Management) message set, it defined a message standard for the exchange of bank account management information in a bank-agnostic manner.  In 2013, Deutsche Bank, in collaboration with a group of major transaction banks, vendors and key clients, set out to establish a complimentary set of rules as to how to interpret and fulfil SWIFT’s ISO 20022 acmt messages to prevent diverse or inconsistent interpretations of their content; an aim that formed part of SWIFT’s “Common Global Implementation Market Practice” initiative (CGI-MP).

This group – Working Group 4 – is focusing on acmt version 1 (in order to protect investments by clients and banks already using these messages). CGI-MP is intended to define harmonised field-usage to facilitate the easy and consistent exchange of information between participants, and in alignment with this goal Working Group 4 is attempting to maintain all technical XMXL rules on mandatory and optional fields and field lengths in order to avoid modifying the XML-scheme itself in any way.

The format review was completed and the proposal submitted to CGI-MP; it is now approved, with the harmonised format publicly available and forming the basis for CGI-MP–compliant eBAM messages. This lays the foundations for the implementation of truly bank-agnostic electronic bank account management. By creating standardised requests – to open or close accounts, update signatories and change authorisations, or other mandates – which can be processed electronically across banks and corporates alike, this structured exchange of data has the potential to bring further efficiency gains. As corporates receive instantaneous responses from the bank, their TMS will be able to process and reconcile them to update the group’s position to ensure an accurate and real-time overview.

Not only will this eliminate the need for corporates to be dependent on – and hobbled by – paper-based and manual processes, but the bank-agnostic potential this offers means banks can be differentiated by their services levels, in terms of response time and automated data processing.

The ISO 20022 acmt message set has currently only been taken up by a small number of forward-looking treasurers, but awareness and demand are growing as the usual pitfalls of current methods raise their heads. And eBAM has further potential – to support the use of digital signatures and, resultantly, authorise changes to bank-account set-up without exchanging paper. Eventually, these seeds will herald the bloom of a complete end-to-end electronic processing of BAM, like that which exists for payments.