The BAI messaging format is about to be overhauled.
The format, which dates from the early days of computerized cash management, has not been maintained by the Bank Administration Institute for more than a decade.
As a result, the standard code sets have been so widely adapted and customized by individual banks that they have essentially become proprietary from bank to bank.
The variations in code sets mean difficulty, and extra costs, for companies that want to add or switch a banking relationship without a painstaking internal project to change reams of incompatible data fields and definitions.
"Everybody has a very customized version of a BAI message that used to be a standard," said Rene Schuurman, Citigroup Inc.'s global products manager for connectivity services, who is a leader 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."
Without consistent standards, U.S. banks cannot offer clients the transparency in "real-time," live views of cash positions between receivables, payables and treasury that many corporate finance executives believe they need to maximize holdings and monitor liquidity risk. And this puts the United States out of step with the rest of the world, which is moving toward more uniform financial reporting built around global standards.
The BAI code sets, which are used for most cash management reporting and reconcilement needs in services like lockbox and positive-pay, carry remittance and other types of data — for example, debit/credit amounts, item counts, funds type, account numbers — between banks' computers and those of corporate treasury operations.
Now, 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 standard that will mean compatible code sets across banks and industries and keep the United States in step with international trends toward homogenous messaging formats in payments and transaction data.
Such an off-the-shelf component to cash management reporting would do more than ease the burden for megabanks of retrofitting and maintaining hundreds, if not thousands, of code variations. Jeanne Capachin, the vice president for global banking research at the Financial Insights unit of International Data Group Inc., said that regional institutions, too, would get a huge boost toward competing for the business of national and multinational corporate clients.
"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 Corp., Citigroup Inc., Bank of New York Mellon Corp. and Royal Bank of Scotland Group PLC joined in September with the Accredited Standards Committee X9 in Annapolis, Md., to begin hashing out an early consensus on which BAI codes to keep, delete or modify into the new standard.
The project has more than a dozen financial and corporate participants. Nacha, the electronic payments association, and 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 at the global financial cooperative Swift who also is working with the banks and X9.
Ultimately the plan also is to merge the resulting BAI models with the existing global financial messaging standard known as ISO 20022, Capachin said. "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."