Corporate treasuries around the world eagerly await the arrival of eBAM (electronic bank account management). The premise of eBAM is simple -- it is the automation and standardization of the processes relating to bank account management and legal entity account management. Despite being simple, eBAM is not easy, and the transition from a paper-based, traditional bank account management process to eBAM is a giant leap, requiring the collaboration of multiple stakeholders and parties.
As treasury technology has continued to become more sophisticated in recent years, the seemingly basic actions of opening, closing and maintaining corporate bank accounts have stood still for decades. Historically, multinational corporations managing tens, if not hundreds, of bank accounts did so using manual, paper-based, time-consuming processes. At a high level, eBAM offers visibility, efficiency and convenience, enabling corporations to standardize bank account management activities. The underlying objective is to remove paper from the processes and enable corporates to access and manage their records via an online interface. The elimination of paper from the process also allows greater risk mitigation by removing the human element.
While the events of 2008 provided a catalyst to its development, the concept of eBAM pre-dates the financial crisis. Corporations have explored the possibility of taking control of their bank accounts since the early 2000s. In 2007, workgroups initiated the standardization of eBAM and several early pilots were released. Following the 2008 financial crisis, treasurers have focused more closely on bank counterparty risk, embracing a multi-bank model. This focus on counterparty risk has only grown in recent years. eBAM permits corporations to simplify the nuts-and-bolts processes, like account opening and closing, and in addition provides the ability to add and remove signatories on accounts and create more detailed and bespoke reporting.
Before eBAM can succeed however, there are challenges that must be overcome. Entities involved must first map out terminology and agree on common definitions. Acceptance of eBAM across multiple countries is also a key factor in corporate adoption. Without a global product offering, eBAM will have little value to a large number of corporates. Another major challenge to implementation relates to the acceptance of digital signatures, which would allow eBAM contracts to be recognized in a court of law in a wide range of jurisdictions.
Although many corporations continue to grapple with inefficient account processes, eBAM is becoming a reality. A number of global banks are offering eBAM on a pilot basis and many multinational corporations are already using it to streamline their bank account management. At its early stage, eBAM is not an off-the-shelf solution and the pilots currently taking place require significant customization. The challenge is to ensure that these pilots do not fall into the trap of being so tailored for a particular company's or bank's needs that they cannot be used as the basis of standardization.
It is important that corporations instigate collaboration by engaging with their banks to ensure that eBAM solutions continue to meet as many requirements and preferences as possible. One area important to the evolution is the development of a web-based repository. More than anything else, treasurers are looking for eBAM to provide a single repository of data as it relates to bank account records. Interoperability is vital for solutions to offer full views of corporations' accounts across a number of different banks.
As eBAM adoption begins to roll out across the industry, behind the scenes a huge collaborative effort has been taking place in order to iron out the technical issues and determine the direction that this initiative will take. Banks, corporations, treasury management system providers, standards organizations, SWIFT service bureaus and digital signature providers must all work together for eBAM to be successful.
Inevitably, eBAM has the most to offer multinational corporations with large numbers of bank accounts across multiple geographies. In addition to the first wave of possible benefits, such as increasing transparency, streamlining processes and achieving cost savings, adoption of eBAM can enable treasurers to implement wider-reaching initiatives in order to centralize treasury processes further, allow straight through processing, and enhance efficiency and speed. As a data repository, eBAM offers an opportunity to synchronize records and make them accessible online. The ability to access information with a few clicks of the mouse allows for the efficient collating of up-to-date data, rather than working for days to gather the same information.
To achieve the benefits which eBAM promises, the parties involved in eBAM must continue the spirit of collaboration, with banks and corporates working together to overcome obstacles and shape the development of this technology. Gaps in global standards and mutual goals can only be bridged by all stakeholders concerned working together to make this happen.
Moving forward, there is no reason why development should stop here. While eBAM technology was created specifically to tackle the problem of inefficiencies within bank account management processes, there are several areas of interaction between banks and their corporate clients where paper continues to dominate, capital markets and leasing to name a few. Widespread eBAM adoption could lead the way for the creation of a single digital identity solution, which could have a wider application across corporate banking.
Tom Durkin is Global Head of Integrated Channels at Bank of America Merrill Lynch.