Electronic billing tops agenda for cash clients

Duncan Kerr
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Corporate treasurers believe their cash managers give them adequate transparency on banking fees, but overwhelmingly they want a common electronic bank billing format to help deliver greater visibility

Most global banks have for years provided their US multinational corporate clients with a form of electronic billing that breaks down all the fees incurred for banking services, crucially enabling treasury teams to compare and analyze the charges levied by their core relationship banks.
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But while the US has led the way in developing provision of this type of information that can enhance a treasury’s visibility of a key operational cost, outside the US and particularly in Europe and Asia, granular and comparative electronic bank billing is far less prevalent.

One of the main reasons is that there is no single electronic standard for the exchange of such billing information agreed and applied unilaterally by banks and their clients all over the world.

Three standards are already in use independently and collectively – the so-called 822 in the US and the Twist BSB and IS0 20022 globally – but none have been adopted as the global standard. Nevertheless, there is overwhelming demand among banks’ corporate clients for this to happen.

According to Euromoney’s 2014 cash management survey, over 60% of a record 28,000 treasury professionals from non-financial corporates and financial institutions want to see the universal use of a common electronic bank billing standard, with Asia Pacific based treasurers the highest by region among them at 68%. By comparison, 50% of Europe based treasury professionals want it.

Do you want to see universal use of a common electronic bank billing format 

Corporate treasurers at two large multinational companies in Europe and Asia sum up treasurers’ responses to the question of which areas of cash management and treasury they want their core cash management banks to help them improve most in the coming year.

"Understanding of all their various fees – very complex now," says one.

The other says: "Help with simplifying optimizing bank/account structure driving elimination/reduction of fees."

Company structures are often complex and the data and documents, often in paper files, relating to contracts signed with each bank can be located in different parts of the business. Such decentralized storage can often make it difficult for companies to check whether fees paid correspond to the fees agreed upon or whether any rebates have been correctly applied.

As a result, an analysis of bank fees is often manually intensive, and can be very difficult to verify accurately the international bank fees across a company. For the management of the company, this makes it difficult to obtain a global overview of their bank fees and to control cash management fees. Electronic bank billing helps manage this better.

 common electronic bank billing format

Standardized electronic bank billing reports, combined with a system in treasury that automatically imports such reports, analyzes the fees paid, compares them against those agreed on in the original contract, and reconciles them, can save time and money.

The increasing demand among companies globally for electronic billing, as the survey results show, could hasten the adoption and more widespread use of one of the two standards – the Bank Service Billing standard developed by industry working group Transaction Workflow Innovation Standards Team (Twist), and an equivalent ISO 20022 standard developed and launched by Swift.

However, Tom Durkin, global head of integrated channel solutions, global transaction banking, at Bank of America Merrill Lynch in Chicago, says that even if either of the Twist BSB or Swift’s IS0 20022 standards are taken up globally, "universal adoption of an electronic billing format will be more of a marathon than a sprint".

The lack of technological ability of some banks to regularly provide such information is one reason why this will not happen overnight, another is simply that many companies do not have the technology and operational expertise yet to receive and use it in the way that they want.

"Companies need to build an operational model around this and have an effective interactive model with their subsidiaries," says Lisa Davis, global head of enterprise services, treasury and trade solutions, Citi. "The pace of adoption is partly due to the fact that some companies have not invested substantially in building this type of operational expertise as their priorities continue to be in creating efficiencies in their own processes first (e.g. shared service centre creation) and only then look to optimize bank billing."

Most global banks tend to operate a centralized global billing infrastructure that uses both the Twist BSB and ISO 20022 standards, but Davis says that for a global bank to provide this type of information to its clients it takes some ingenuity too because of the multiple countries, currencies, languages and platforms clients transact with them on any given day.

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"Pulling that data together into a single format that a treasurer can use and derive value from is challenging," she says.

Davis adds that many of Citi’s multinational clients outside of the US, and particularly in France and Germany, have adopted the Twist BSB solution simply because the treasurers want to have "clear visibility of the transaction fees they are paying to banks globally."