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Management of bank mandates – eBAM – a lot of challenges
| 19-4-2017 | François de Witte |
In the past, a bank mandate for a company was a fairly simple affair. There were panels of signatories (paper-based) and payments were controlled by the banks based upon the DOA (delegation of authority).
However there remained a lot of risks:
Over time, dealing mandates have become more common. The concept of limits, which was already in use for payments, was also introduced for the financial market operation. Corporates used the bank to police these different limits, essentially expecting banks to verify each signature against the mandate and to check limits for each dealer.
With the growing complexity of the business, and the increased use of electronic banking channels, for several corporates, the management of the bank mandates is now a real challenge. If you have a complex business with a very large number of accounts, it is very difficult to have an overview of who has the power to sign transactions, what is the delegation of authorities and which is the link with the legal database of the company.
In addition, most of the banks have their own set of documents and the bank account management communication with the banks is still largely paper-based.
In order to streamline these processes, SWIFT developed some years ago its e-BAM initiative, aiming at streamlining these processes. Also vendors have started to bring new solutions in the market.
The current article aims to make a status on the question and to highlight some opportunities to rationalize the process.
Main pain points and requirement of the corporates
When discussing with corporates, I usually identify the following pain points in the management of the bank mandates:
Typically, the main requirements of corporates are to:
Initiatives taken by SWIFT
Some years ago, SWIFT launched the e-BAM initiative. eBAM is based on the exchange of ISO 20022 XML messages, developed by SWIFT, which mainly cover the processes of opening, closing and changing bank accounts and mandates.
The SWIFT eBAM message formats provide both the standardized format, necessary to communicate account management information between companies and their banks. SWIFT eBAM messaging consists of specifically designed XML based file formats that allow companies and banks to conduct five common bank account management conversations. These types of conversation allow you to perform virtually all bank account management tasks electronically as outlined below:
Source: SWIFT Presentation on E-BAM
The key advantages and acknowledged benefits in adopting an eBAM solution are:
There is a recognition in the market, especially with large corporations of the necessity for eBAM. Standards have evolved, solution provider came up with solutions and mono-bank platforms are being developed. But still, the standards need to be perfected. In addition, whilst several banks have developed e-BAM in their own platform, only very few banks have developed a fully-fledged e-BAM multibank solution.
BNP Paribas came up with solutions in this area and more recently Société Générale. The lack of adoption by other banks of this multi-bank solution is an obstacle for the further adoption of e-BAM.
How to start such a project:
Streamlining the bank account management is a complex project, requiring a number of steps:
For smaller corporates, standardizes process and an Excel database can be a good solution. However for more complex organizations, managing over 100 bank accounts with over 5 to 10 banks, there can be a business case to combine the streamlining of the processes with a specialized solution, e.g. a web based “Software as a Service” (SaaS) BAM solution to automate and streamline internal processes and to digitize them. This includes a centralized document management internally and externally, towards the banks, as well as a central repository and shared directories for document storing, spread across the enterprise. This also encompasses the automation of the correspondence to the banks and the auditors. I also recommend to have a link with the legal database of the company.
There are a number of solutions in the market, such as middleware providers (e.g. TIS and PowertoPay), the offering of TMS providers and the Visual Sign solution of Equity. According to my information, Equity is the only European vendor providing an integrated link with the legal database, ensuring a close link with the Delegation of Authority, which is the source of the bank mandate.
When working on such a project, do not underestimate time needed to gather & validate information. It is a complex project which needs to be phased. Split & prioritize the different phases of the project, and keep it simple!
Conclusion
The management of bank mandates is a complex process, which in many companies is still managed manually with paper-based processes, without a central database. There is a real opportunity to automate and to digitize these processes in one central repository.
SWIFT launched some years ago e-BAM, an interesting initiative to standardize and automate these processes, including the customer to bank communication. However the adoption of e-BAM is a slow process and only very few banks are offering through multi-bank solutions.
There exist solutions in the market to develop standardized automated processes. If you have the require critical mass, it can be useful to consider them. Be aware that this is a complex exercise, as you need to ensure that the system is connected to your applications, including the legal database. But in the end, it is worth the exercise.
François de Witte
Founder & Senior Consultant at FDW Consult
More articles from this author:
Working capital management : Some practical advice on the optimization of the order to cash cycle
PSD 2: A lot of opportunities but also big challenges (Part I)
PSD 2: The implementation of PSD2: A lot of opportunities but also big challenges (Part II)
Treasury : Proposed “to do” list for 2017
Interesting apples and oranges a.k.a. the Dutch Fintech Awards
|18-4-2017 | Pieter de Kiewit
Bearing this in mind, I always try to combine personal meetings, with calls, with reading, events and so on. For the people who know me: I am always behind on my reading. So much to read, so little time! Events and personal meetings get my creative juices flowing. Today I trained MBA students of RSM in their labour market approach, very inspiring. And I look forward to the Dutch Fintech Awards that are organized shortly.
Dutch FinTech Awards
Being a recruiter with a focus on corporate treasury, I have tried to find the Fintech Awards contenders with a relevance for the corporate treasury community. This is not as obvious as it seems, only a few are. I do not envy the jury of this event. Categorizing the contenders is almost impossible, let alone judging them. Comparing blokchain insurance with video financial services sales and a crowdfunding platform with easy on-line payments, is comparing apples with oranges. One thing is clear: some of the potential award winners are very good at attracting social media attention.
Despite their diversity, each of the companies tells a different inspiring story. Some of them are about cutting edge technology, some of them are about understanding potential clients, others are about smart entrepreneurship. One thing I am sure of is that the level of creativity of the entrepreneurs will be extremely high. I am ready to be inspired and will inform you in my review blog afterwards.
On 21 April the Dutch FinTech Awards will take place in Utrecht. A day with many international keynote speakers, provoking master classes and pitches by the Dutch FinTech 50. Make sure you register today and join this unique opportunity to meet 300 International FinTech stakeholders. Via treasuryXL you can get a discount on the regular ticket. More information
Pieter de Kiewit
Owner Treasurer Search
Dutch FinTech Awards (21 April): discount via treasuryXL
| 12-4-2017 | treasuryXL |
Dutch FinTech Awards & Conference
You are more than welcome to join the Dutch FinTech Awards and Conference of 2017 where innovative and disruptive FinTech companies are awarded. Meet 400 hand picked entrepreneurs, bankers, investors and advisors, demonstrate thought leadership, extend your network and develop business. Join the festive award ceremony on 21 April 2017.
What is happening?
Tens of thousands of finance jobs are vanishing. Google, Apple, Facebook and countless FinTech startups are disrupting the financial sector. Innovative companies are eager to please millions of frustrated banking customers. Investors are fascinated by the phenomenal profits made by banks struggling with outdated technology.
Get your ticket with discount
We have the opportunity to give you a 150 EUR discount on a regular ticket.
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We hope to meet you at the Dutch Fintech Awards 2017 at the Rabobank HQ in Utrecht on 21 April.
If you have any questions please do not hesitate to contact me.
[icon icon=”envelope” color=”” size=”tiny” with_circle=”0″ link=””] [email protected]
[icon icon=”phone” color=”” size=”tiny” with_circle=”0″ link=””] 06-21303744
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