Is the rise of electronic bank account management coming?

When treasury and finance departments talk about bank account management, it means that bank accounts, transactions, and balances are centrally managed from a single application to collect, view, analyze and monitor cash flows, accounts statements, and incoming reference payments.  

Bank account management is a major task for treasury departments and when there are tens or hundreds of bank accounts, it’s impossible to rely on spreadsheets only. This is the reason why many corporates rely on treasury management systems (TMS) for bank account management. 

To explain the direction of electronic bank account management, we will take a look at what it is and how it works, its benefits, the challenges of its implementation and adoption, and whether there's a future for eBAM on the treasury roadmaps.

What makes electronic bank account management (eBAM) different? 

Electronic bank account management (eBAM) is taking traditional bank account management one step further. eBAM provides automation between the bank(s) and the organization. 

Traditional bank account management is a manual process that is extremely time-consuming and error-prone, so companies are looking for ways to automate and digitalize their current processes with an eBAM. 

While the eBAM has been introduced to the public already over a decade ago, the adoption rates are lower than expected for reasons such as low participation on the banks’ side due to disparate security policies among banks, lack of conceptualization, and reluctance to innovate existing processes.  

How does an eBAM work?  

Corporates are looking for more control over the processes related to opening, maintaining, and closing bank accounts..  

With eBAM, companies can do the following:  

- Open bank accounts 

- Close bank accounts 

- Maintain bank accounts by setting spending limits 

- Update account signatories and transactional signatories 

- Follow & analyze the bank account balances 

- Generate reports for regulatory purposes 

EBAM technology & history 

Back in 2010, SWIFT announced that they have released a new standard for electronic bank account management (eBAM). 

From the beginning, the idea was to streamline the mundane manual process of bank account management to be able to open and close bank accounts easily, as well as maintain them from a single platform. The technology was based on ISO 20022 XML messaging standard to streamline the communication between the banks and the organizations.   

In the first pilot, the participants included three corporate clients, three banks, and three software vendors. The main goal was to save costs and time and eliminate paperwork that was still significant a decade ago, especially in certain countries. Today, digitalization has shaped treasury management significantly in organizations, however, bank account management is still a process that lacks automation. 

Why is eBAM important for treasury?  

Even a medium-sized company can have multiple-bank accounts even if they just operate in a couple of markets. At the enterprise level, there may be even hundreds of bank accounts in tens of countries. This means that the treasury and finance departments need to deal with a vast amount of data to ensure that all bank accounts have sufficient amount of funding, the spending limits are accurate, and the correct people have signatory rights to authorize financial transactions.  

When an organization has over 100 bank accounts, they typically have a policy for bank account management to ensure that there are no additional bank accounts that are not used and that all bank accounts are managed and controlled according to the company’s regulations. Each bank account requires significant time from the treasury team to manage. This can be an extremely manual task that can be automated with an eBAM. 

The benefits of an eBAM 

Besides the advantages of automation, there are more benefits that corporates can realize when they invest in the implementation of an eBAM.   

Visibility into account balances globally 

Corporates can overcome the challenge of lack of transparency over the bank accounts across the legal entities of the group as well as centralize bank account management. 

Streamline internal processes for efficiency 

The treasury department can move away from manual processes and automate the task of bank account management and maintenance largely with an integrated workflow for electronic bank account management.   

Manage all the accounts from a single platform 

For more centralization and control on the group level, having a single platform for creating, maintaining, and closing accounts can have a huge impact.  

Possible integration with the treasury technology stack when necessary 

For the best possible results, sometimes it’s necessary to build integrations with other systems such as ERPs or TMS to have all the information within one place.   

Improve security 

Security can be also a barrier to setting up an eBAM, but it’s also one of the benefits. Having a repository for all bank account-related information across all banks and approval workflows can significantly reduce the risk of fraud and support the company’s compliance with regulations.  

The challenges of adopting an eBAM  

eBAMs are not widely adopted and this also means that there are challenges when it comes to implementation.   

Missing driving force 

When a new solution is entering a market, it can be really important to have a driving force behind it to make the adoption more lucrative for companies. Although eBAM was originally supported by SWIFT, it did never receive for example a push (or for example a new regulation or directive) like what we have been experiencing now with P27.   

Different countries have different regulations and rules 

Just like with an in-house bank, different countries have different laws and regulations regarding an eBAM especially if the corporate has relationships with banks across countries. Strict regulations can influence and restrict data sharing across borders.  

Security concerns 

While security was also a benefit of using an eBAM, it is also a concern as it is a sensitive matter for banks. Banks tend to have their own unique security policies specifying encryptions, protocols, and specific restrictions regarding data sharing.  

Often, the eBAM setup should be bank-specific to comply with the bank’s security requirements and this could be one of the reasons why eBAMs are not more widespread currently.   

Implementation 

The implementation requires investment and treasury departments should carefully analyze the time and cost of setting up the project compared to the benefits.   

Lack of standardization 

Lack of standardization is still an issue in the world of treasury management. Standardization would allow solution providers to implement the solution more rapidly across different banks.   

Although the ISO 20022 standard has been an important milestone for communication with banks, yet, the interpretation of the different data fields for eBAM can still widely vary between banks, corporates, and vendors.  

The type of eBAM solutions 

There are three ways of connecting to a bank to automate the bank account management process.  

1. Bank-centric solution: the organization connects to a bank by the solution owned and hosted by the bank. 
2. A solution from a cash and treasury management provider: choose a vendor to provide a solution for automating the bank account management.  
3. Develop your own solution: create an in-house solution for managing your bank connections automatically.  
   
   

EBAM Vendors 

Without going into details, there are a few vendors on the market that offer eBAM solutions. Nomentia is among the vendors that provide clients with electronic bank account management solutions. Other vendors include FIS Global, Omikron, or Equity.   

Banks with eBAM solutions 

One of the barriers to the low adaption of eBAM is that only a few banks have joined the initiative by working with a solution provider or developing their own solutions. This can also reduce the possibility of developing your in-house solution.  

Some of the banks that offer eBAM solutions are Bank of America Merrill Lynch, Citibank, JPMorgan Chase, Deutsche Bank, BNP Paribas, or Citibank.  

Nomentia eBAM in practice: A case study with Schott

As Nomentia is one of the vendors that provide companies with an eBAM solution through creating a workflow, if you are interested in a real-life implementation case study, make sure you take some time to read the story of setting up an eBAM with Schott with the support of Deutsche Bank. 

The future of eBAM  

The future of eBAM largely depends on digitalization, standardization, and changing regulations. Before regulatory agencies would promote the importance of digitalized processes and standardization, the adoption of eBAM will remain low. Only when regulatory agencies, banks, and solution providers decide to work together on the further development of the solution will eBAM start playing a major role in the treasury processes of global corporates.