Digital solutions streamline corporate banking

Kimberley Long
Published on:

Corporates managing multiple bank accounts are finding digital solutions to improve efficiency, including electronic bank account management (eBAM) and virtual accounts.

Holding hundreds of bank accounts is an inefficient and costly process for corporates with a global footprint. At the very least it is time-consuming, and at worst it can leave corporates susceptible to fraud.

Alex Wong-160x186.
  Solutions are variable
and there remains some lack of standardization across banks

Alex Wong,

Corporates will often find they have hundreds of accounts through international expansion, or through acquisition of other organizations. Others, such as legal firms and fund managers, hold separate accounts for their clients’ deposits. 

Of course, regulation plays a role too. For example, some international film companies are required to open a new account with the production company working on each new film.

It can mean some companies have huge numbers of accounts to oversee. Research by KPMG of 48 corporates for the BNP Paribas Cash Management University found that 28.3% of corporates surveyed have over 1,000 bank accounts globally.

The cost of having all of these accounts open is significant. 

Carsten Jäkel, partner, finance and treasury management, at KPMG, says: "When you look at the overall sum of banking fees at an average corporate, it will be most likely seven-digit figures. Reducing the number of bank accounts alone would contribute significantly, not mentioning the corresponding internal costs. We’ve seen global multinationals saving millions in banking fees."

The evolution of Sepa and the ability to consolidate accounts in the eurozone has helped some corporates to reduce the number of their accounts, but many will still require accounts in numerous locations due to regulations or the need to transact in the local currency. And this is not to mention the numbers of accounts they might hold outside of Europe.

The biggest issues of multiple accounts is not always directly linked to cost, but the capacity needed to maintain them all. 

Alex Wong, GTS EMEA solutions consultant at Bank of America Merrill Lynch (BAML), says: "It is often the indirect cost of the administrative burden and effort that may have more impact; fees may be overstated."

Paul Bramwell, SunGard

Electronic tools have emerged to consolidate this information, but, so far, corporates do not seem to be moving towards using them. The KPMG study found that 80% of respondents do not have a central tool in place to give overviews on their accounts.

Paul Bramwell, SVP treasury solutions, at SunGard, says: "There is significant value in moving away from paper-based processes to electronic communication where processes that formerly took days can be completed in a fraction of the time. 

"This real-time ability to view a bank account structure adds tremendous value to a client and ultimately also to the bank who can move away from inefficient paper-based processes."

Paul Greenhalgh, director, cash management corporates UK, global transaction banking, Deutsche Bank, says: "Treasurers should look to eradicate duplicative accounts wherever possible. 

"Those treasurers who aspire to best-in-class platforms should work with bank partners to deploy solutions such as virtual accounts and on-behalf-of structures where appropriate. Such solutions can reduce bank accounts held to the bear minimum." 

'Payments on behalf of' is when a company uses some its liquidity to make a payment to another part of its organization. It comes about when a company has already centralized its financing into a treasury centre. The parent part of the company can then make the payments to the subsidiaries.

Paul Greenhalgh-160x186
Paul Greenhalgh, Deutsche
EBAM has emerged as a solution. The bank account management platform utilizes the ISO 20022 messaging format. The messages that pass along Swift’s channels can be pulled together to create an overview, regardless of their bank or country of origin. This can then automate the opening, closing, reporting and signatory management.

"The management of entitlements, signatories and access can become overwhelming when tracking multiple accounts and multiple users who may be leaving or joining the company involving multiple banks – this task can be never ending," says Wong. 

"EBAM goes a long way to helping with this, but solutions are variable and there remains some lack of standardization across banks."

While the use of eBAM is growing, it has yet to reach any significant level amongst corporates. Some of the reluctance might come from the lack of quick benefits, beyond increased data gathering.