A new, streamlined connection to the banks

EBAM: efficient bank account management for corporates is now on the right track

A new, streamlined connection to the banks

Efficiency, productivity, growth, risk control and reporting quality are continuous points of attention for virtually any organization. These issues therefore also affect the corporate treasury processes. Bank account management, one of the building blocks of treasury, has become a focal point during the past few years. Demand for – and now also supply of – applications for electronic management of corporate bank accounts has increased.

The instruments for electronic bank account management (EBAM) are currently offered in various forms by treasury management software suppliers, an increasing number of large banks, SWIFT and providers of other applications in the field of connectivity and digital identification (ID). EBAM allows for bank account management via a direct connection to bank relations, creating an overview of all bank accounts. This includes the authorized persons and associated limits, authorizations, correspondence and related services such as credit lines and payment limits.

After completion of agreements with the banks, SWIFT standardized XML messages with documents can be sent directly to the banks from a secure web environment with digital ID authorizations1, allowing for opening and closing accounts or editing authorizations without any paperwork. All communication is recorded and saved, which implies that all actions are traceable. This makes for transparent and controllable processes, satisfying the internal and external auditors.

Standardized XML messages with documents can be sent directly to the banks from a secure web environment with digital ID authorizations.
Standardized XML messages with documents can be sent directly to the banks from a secure web environment with digital ID authorizations.

Trends such as centralization and standardization of treasury processes and increasing independence of banks have arisen during the past few years, resulting from an increasing need for cash flow optimization, less bank dependency and increased risk control. This has created demand among corporate treasurers for adequate instruments, driving them to invest in traditional software as well as in payment factories, SWIFT connectivity and bank rationalization.

Implementation of an EBAM application will include a number of actions. Corporates determine which existing or intended future bank relations are preferred for using EBAM. The option of electronic account management must be reviewed with the relevant banks. Furthermore, the software to be applied needs to be selected. In the case of a single bank relation, the existing Internet banking application could suffice. If the corporate holds accounts with more than one bank, management based on the existing treasury management software is a natural choice.

Meanwhile, an increasing number of suppliers add an EBAM application to their software. Agreements will have to be made with the banks in order to agree how communication – i.e., sending EBAM-standardized XML messages including documentation – will be processed. The XML messages can then be sent from the treasury management software via a secure Internet connection.

Furthermore, direct communication via SWIFT is possible, independently of banks. If a corporate already has a SWIFT connection, EBAM will be complementary to the existing communication traffic of payments, bank statements and possibly even digital bank guarantees. If a central payment factory has been implemented and the operating companies’ accounts also fall within the management scope of corporate treasury, the EBAM range will be more extensive.

Benefits include time savings and lower risk due to improved visibility and control of bank accounts

Corporate treasuries that manage 50 to 100 accounts or more can expect to benefit from EBAM. These benefits include time savings and lower risk due to improved visibility and control of bank accounts. Also, it is less probable that problems will occur during (internal) audit. If a company is to follow the Report of Foreign Bank and Financial Accounts (FBAR) regulations of the United States, which demand taxpayer authorizations for all bank accounts, even more time and eff ort will be saved. Given the necessary KYC (Know Your Customer) procedures, opening bank accounts with new bank relations will, for the time being, have to be completed outside of EBAM. Software suppliers, mostly in collaboration with banks, have started testing EBAM from the start of this decade and are now offering products. In spite of the above-mentioned trends within companies, the 2008 credit crisis initially decelerated development of the EBAM range.

Below is an example of a change to authorized persons for a bank account, done via EBAM.

Example of communication with a bank via EBAM

In many corporate treasury departments, the systems, processes and infrastructure work properly. This is an essential assumption for effective and efficient control of bank accounts. Effective processes are characterized by timely, correct reports of all bank account information within the entire organization. Periodical analysis of the bank account structure is recommended for optimization. Finally, any investment decision requires a solid economic analysis in terms of cost and return. Expected benefits in terms of time and effort are compared with the investment. This is why we expect that the EBAM range will instigate a new efficiency round among corporates and improvement of bank account structures.

It happens everywhere: employees authorized to make payments on behalf of the company leave the company. Normal practice is for these employees to take their personal belongings home, usually in a cardboard box. However, in this digital age an employee has more than just physical possessions; they will also have bank account access numbers and passwords. A treasurer is responsible for financial logistics: cash and cash equivalents, the accounts holding these resources, and also for managing access, limits and mandates regarding these accounts. This is why action is required from the treasurer. He or she will have to ensure that the departing employee no longer has access to passwords and PINs for the company accounts. And these days, in 2012, this can be done electronically – quickly, safely and remotely!

1 The option to make use of digital identities, including signatures for account management, is dependent on local legislation and regulations.