Birth pangs for nascent electronic bank account industry

For companies with hundreds of bank accounts, the processes involved in opening, closing and managing accounts are often manual, paper-based and prone to error and delay. Opening an account can take a week or longer to complete, while the records kept by banks and companies are rarely synchronized. This can leave businesses exposed to the risk of fraud if signatory information is not updated promptly once signatories have left the company.

Consequently, the prospect of automating these processes using eBAM is one which interests many treasurers. Different flavours of eBAM are under development to suit the needs of different companies: while a number of banks have been building proprietary portals for web-based payments, a few have also been looking at the possibility of XML-based eBAM solutions for file payments.

However, the development of eBAM solutions is progressing slowly due to the technical challenges involved. A few companies are piloting systems with their banks, or running live programmes – but there is some way to go before this technology is widely available.

A further setback has recently emerged with the cancellation of Swift’s eBAM Central Utility (E-CU) project. The E-CU was conceived as a multi-bank eBAM platform, which would also ensure eBAM standards were adopted consistently by different banks and vendors. “On top of the standards Swift has developed for eBAM, we were looking at developing a portal,” says André Casterman, Swift’s head of corporate and supply chain markets, adding that despite market interest in the project, the decision was taken to put the project on ice at the end of 2012 due to funding reasons.

Is the cancellation of the E-CU bad news for the future of eBAM? “It’s a challenge,” says Tom Durkin, global head of integrated channel solutions at Bank of America Merrill Lynch. “We looked at the E-CU as an opportunity to benefit clients who were looking for a solution that they could leverage out of their treasury workstation.

“The central utility brought multiple different benefits. The challenge is how the industry can work together without that framework. We’ve proposed to other banks that we could move forward with supporting eBAM via a working group using the governance model developed by the Common Global Implementation for ISO 20022 XML.”

Emma Jackson, EMEA eBAM product manager in treasury and trade solutions (TTS), Citi Transaction Services, says the impact of the E-CU’s cancellation “does not impact Citi’s eBAM efforts on our CitiDirect BE platform, in addition to the bank’s support of the 15 eBAM XML messages.

“For clients of TTS, using XML today, the E-CU was seen an additional eBAM option for clients, whereby it would continue to leverage the bank’s existing CitiConnect platform for XML.”

Jackson adds: “For these clients, we don’t believe that there would be a major impact on their decision to go with an XML solution in the future or a bank solution – the solution being multi-banked or not will be a bigger component of this decision.”

EBAM's world 

Meanwhile, banks and vendors continue to work on developing eBAM solutions. Jackson says Citi is coming out of the pilot phase with its own eBAM module on CitiDirect BE. “That has been in production pilot for a few years and we are now bringing more clients on to that solution,” says Jackson.

“With eBAM XML, we are in the pre-production pilot stage as we are working with leading eBAM vendors. As the messages are still being enhanced, a more user-friendly version is expected later this year. In the industry as a whole, eBAM XML is much earlier in its development cycle than existing bank-specific channels.”

Casterman says Swift is continuing to support eBAM in a number of ways, including the development of ISO 20022 standards as well as 3SKey, Swift’s digital signature technology.

Meanwhile, he points out that while mandate management is a key element of eBAM, the reason why this is important is that this information is used by banks to validate incoming payment files. This is an area which is attracting substantial attention independently of the eBAM initiative. “In France, the banks offer advanced security services which include validation services on incoming payments – even when payments are submitted on a file channel,” says Casterman.

“Those checks might include asking whether the person in question is allowed to execute a payment of this value, or whether that person is allowed to credit that particular beneficiary. Banks are now beginning to export those kinds of services outside of France for the first time.”

While this type of validation is not dependent on the existence of eBAM, Casterman says that checks of this type cannot be carried out if the mandate information is not properly maintained.

“In the past, file-based payments were not checked against entitlements,” he adds. “Now we are promoting this and are working with banks to help them offer those services to corporates that are not used to receiving them.”

However, where eBAM is concerned, the majority of companies are realizing they will need to be patient for a little while longer.

“The interest is there, but with the collapse of the E-CU and consolidation among technology vendors, corporates are a little more cautious regarding to how fast to move,” says Durkin, pointing out that this year has already seen IT2 purchased by Wall Street Systems, and Open Solutions acquired by Fiserv.

“That makes it a slower step – but, in any case, adopting eBAM is more of a journey. This isn’t a plug-and-play solution that turns on overnight.”