Banks now have a stronger business case to adopt electronic systems for opening, closing and servicing corporate accounts.
Many treasury management services went digital years ago. Corporate banking functions, however, such as granting an employee account access, have often been based on aging, paper-intensive systems that have been hard to convert to modern electronic programs.
But experts say banks now have an incentive to modernize: new — and increased — regulatory requirements.
" 'If it ain't broke, don't fix it' has kind of been the mantra," said Steven Murphy, a research director for wholesale banking at TowerGroup. "Because of the financial crisis, I think a lot more senior management and treasury managers and CFOs are looking for better and more efficient solutions to manage … day-to-day transactions."
And now, "because you've got all the regulatory requirements that have been laid on top of financial institutions … managing paper is becoming less and less desirable," Murphy said.
Some banks have adopted the Electronic Bank Account Management, or EBAM, standard that the international bank organization Swift tested and helped establish last year.
EBAM, which went live in April, allows banks to process electronic instructions for opening new accounts, closing old ones, adding and removing authorized users and similar functions.
Executives at Swift, formally the Society for Worldwide Interbank Financial Telecommunication, report increased interest in the EBAM standards from customer banks.
JPMorgan Chase & Co., Bank of New York Mellon Corp. and Citigroup Inc. are all incorporating the standards into their treasury management operations.
Citi, which participated in Swift's pilot initiative last year with the energy company Royal Dutch Shell PLC, began its own test late last year with about 10 business customers that have banking relationships in about 20 different countries, said Gary Greenwald, the New York banking company's chief innovation officer for global transaction services.
Use of the standards requires a significant amount of technical integration for banks and their business clients, he said.
"Like anything in our business, whether it's a major integration for payments processing or collections or setting up cash concentration around the world, this is a project that involves some work for both sides," Greenwald said in a recent interview. "This is not a, 'Hey bank, put us on EBAM and let us know when it's done.' It's much more collaborative than that."
During the Swift pilot effort, Shell worked with the technology vendor Speranza Systems Inc., which was acquired by the financial software firm Wall Street Systems in April.
Glen Solimine, who heads sales for the Wallstreet Treasury product line at Wall Street Systems, said corporations are eager to begin using the standards, which define a format for sending account-management instructions to banks.
Banks are looking at "how do we take those messages in" and process them so that paper also is removed from their own back-end operations, Solimine said.
JPMorgan Chase has started rolling out the capability to its corporate clients, said Lloyd O'Connor, the managing director of J.P. Morgan Treasury Services.
"This is at the very earliest stages of adoption," O'Connor said. "There is still some uncharted territory regarding the receipt and confirmation of electronic documents."
EBAM was certified under the ISO 20022 XML message standards. They enable users to transmit instructions and responses along with attached documents that may be necessary for certain actions.
BNY Mellon participated in Swift's pilot program last year with the industrial manufacturer United Technologies Corp. and Pegasystems Inc. as its technology vendor. The New York banking company now is preparing to conduct a separate pilot program with other clients, said Loretta Gannon, vice president of global product management for BNY Mellon Treasury Services.
"What's become the primary driver is the issues around risk and compliance and how bank account management data has been stored, and how to eliminate the risks," Gannon said. "I think the Swift EBAM standard is coming around at just the right time," she added.
Electronic bank account management is an idea that has been discussed in the industry for several years. It started to gain traction a few years ago when Swift and its members decided to develop standards for how to process such information.
Streamlining these functions has benefits for banks and their corporate clients, experts said, noting some banks report taking two to six weeks to process a request for opening a new account.
"If I'm a relationship manager today, when a client calls me to open a bank account or to make a change or to close it, I may have to transition between 12 different systems," said Adi Reske, the product strategy manager for wholesale banking at Pegasystems, a Cambridge, Mass., business software developer. "I may have to rekey information eight or nine times. I may have to fill out 12 different forms for one transaction."
The redundancy is partly a result of regulatory requirements and the fact that banks have installed various treasury and cash management programs over the years, causing information to be stored in various systems, Reske said.
Complicating matters is that companies have multiple accounts and several banks. A large corporation may have hundreds of accounts open at any given time and may open new ones and close ones that are no longer needed regularly.
That means businesses have to spend more time filling out the paperwork their banks' each require.
"Our banks all know that we want EBAM, and we want them to be ready when we are," said Dennis Sweeney, the deputy treasurer for General Electric Co., which has been a vocal supporter of the electronic message standards.
The company is incorporating EBAM capabilities as part of an overhaul of its internal bank account management systems, Sweeney said.
The standards aim to streamline those functions for banks and their customers by removing "customization" and adding uniformity for how to handle such requests, said Stacy Rosenthal, the senior business manager for payments and corporate strategy for Swift.
"Each bank [has] their own proprietary format, their own proprietary data that they want," said Nancy Atkinson, a senior analyst for wholesale banking at the Boston research firm Aite Group LLC. "If you review … your bank account status and decide, 'We're going to close these two accounts, open these three accounts and change in some way these five accounts,' you were involved in significant paper exchange."