For multinational corporations, every dollar, Euro and Yen counts these days, which means transparency in bank billing has become all but table stakes in corporate banking relationships.
"Corporations have to examine bank fees much more closely now, and the only way you can do that is through electronic billing," says Steven Weiland, chairman of the Weiland Group, an account analysis technology firm. Weiland worked with industry trade group TWIST (Transaction Workflow Innovation Standards Team) in the formulation of the Global Electronic Bank Services Billing Standard (BSB).
The international standard is about three years old, but is now gaining traction as multinational corporations - beset by financial and regulatory concerns - apply pressure on banks to adopt BSB or expand its use into new regions. "The single impetus for a bank to do this is pressure form large corporate customers," Weiland says.
Beyond client attrition, there's not a money-making impetus for banks, at least not in the short-term. In theory, an automated itemizing of corporate accounts and bank fees can actually reduce those fees because transparency strengthens the corporate's negotiating position. "It's possible that this could lower [fee income], but we recognize that it's merely something we need to be able to offer our clients independent of that outcome," says John Langan, a director in Citigroup's treasury and trade solutions organization. "The focus is on providing value and transparency to our clients."
Citigroup is broadening its use of BSB from Western Europe and North America to Latin America, Eastern Europe, Africa and the Middle East as it builds out a global billing platform by year end. "Customers with global footprints have a greater interest in BSB," Langan says, noting that some of the bank's multinational corporate clients have hundreds or even thousands of accounts with Citi in various international jurisdictions.
There are more than a dozen banks using or supporting BSB, including ABN Amro, Bank of America, Bank of New York Mellon, Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC, JP Morgan Chase, Societe Generale, Standard Chartered Bank, Standard Bank (South Africa), and WestPac. Weiland, who says four banks are currently beta testing use of the standard, notes the pace of adoption has increased over the past year, both through the addition of new banks and the geographic expansion of existing users. The addition of heavyweights like HSBC and Society Generale and expansion of firms like Deutsche and Citi is bound to have an affect downstream.
Adherents to BSB agree to formatted electronic billing of the invoices financial institutions send to multinational corporations and other wholesale customers, such as governments. It is a regular electronic statement - usually monthly - that reports on the corporate's use of financial services, including a list of all chargeable service events that occurred during the cycle, along with tax and currency information.
"The bill recipient can evaluate services and make sure they aren't receiving something they don't want, or are being erroneously billed," says Robert J. Blair, executive director of Asia channel management for JP Morgan Chase, which has adopted BSB. Blair is also part of the team that formulated the ISO 20022 international standard covering payments, security, foreign exchange, trade finance, cards and other domains. TWIST has submitted BSB to the ISO for inclusion as an ISO 20022 standard, a move Weiland says would enhance BSB's "authenticity."
The BSB initially grew out of the ANSI 822, an American corporate billing standard, and was developed partly in response to American-based multinational corporations wishing for an international standard. BSB includes virtually all of the business requirements and capabilities found in 822, and also accommodates multi-currency and value added tax for international users. Weiland says 822 users have saved about 10 percent on bank billing fees after deployment of the standard.
For corporates, the benefits of BSB are clear - firms have a standardized manner of verifying and centralizing international bank and cash management fees, an easier way to report to firm management on how bank relationships are being measured, remove labor from analysis of paper-based bank fee records, and ensure compliance with Sarbanes-Oxley and other regulations.
For banks, there are also benefits, albeit intangible. "A bank can't make a great amount of money out of providing TWIST reporting. But on the other hand it's a type of differentiating factor for a bank to be able to offer the service to a specific segment of banks," says Wolfgang Stockinger, head of product management for cash management, Germany for Deutsche, which is offering BSB to clients in Germany and has plans to expand to other European countries this year, and possibly other regions next year.