Even if you don't understand this, your back-office cash management software should. It's a mainframe-based transactional record (a sample version, of course) that ferries remittance and other types of data - debit/credit amounts, item counts, funds type, account numbers - between banks and corporate treasury operations.
Based on a decades-old Banking Administration Institute (BAI) messaging format, they're good for most cash management reporting and reconcilement needs for handling services like lockbox and positive-pay.
But there is an Achilles heel or two with them. These code sets, which haven't been maintained by BAI in over a decade, have been so widely adapted and customized by individual banks that they've essentially become proprietary from bank to bank. The differences in BAI code sets mean difficulty, and extra costs, in adding or switching corporate banking relationships without a painstaking internal project to change reams of incompatible data fields and definitions. And without consistent standards, U.S. banks can't offer clients the transparency in "real-time," live views of cash positions between receivables, payables and treasury that many feel they need to maximize holdings and be aware of liquidity risk.
Such problems have spurred a new effort to create a new uniform model for cash management reporting. Major U.S. banks, cash management vendors and corporations have formally launched plans with a financial industry technical standards body to create a new reporting orthodoxy under an American National Standards Institute (ANSI) standard that will mean compatible code sets across banks and industries, and keep the U.S. in step with international trends toward homogenous messaging formats in payments and transaction data.
"Everybody has a very customized version of BAI message that used to be a standard," said Rene Schuurman, Citigroup's global products manager for connectivity services, and one of the leaders on the project. "We want to go back to that point, go back to a true standard to have a uniform approach, so that we can simplify and streamline our client delivery process, hopefully right away out of the box."
That off-the-shelf component to cash management reporting would do more than ease the challenge for mega-banks in retrofitting and maintaining hundreds, if not thousands, of code variations. Jeanne Capachin, vice president for global banking research at Financial Insights, points out that regional institutions, too, would gain a huge boost toward competing for the business of national and multi-national corporates. "If we go to just one or a couple of standards," said Capachin, "then it's much easier for a regional bank to be able to support customers outside of their main national footprint than it is now."
JPMorgan Chase & Co., U.S. Bancorp, Bank of America, Citigroup, BNY Mellon, and Royal Bank of Scotland each joined up with the Accredited Standards Committee X9 in Annapolis, Md., to begin hashing out some early consensus on which BAI codes to keep, delete and modify into the new standard. NACHA and The Clearing House Payments Co. are also involved, as are cash management services vendors like S1 Corp. "Everybody has money they've invested in legacy systems, so therefore their willingness to change is going to have to have a real payback for them," said Jim Wells, a senior business manager for banking initiatives with Swift who's working with the banks and X9.
Ultimately the plan is also to merge the resulting BAI models with the existing global financial messaging standard (known as ISO 20022). "The holy grail is that no matter what region of the world you're in, what type of business you're transacting, whatever your financial institution, you could use that ISO standard to communicate," said Capachin.