Bank Services Billing: European companies seek greater transparency on bank charges
Some of Europe’s biggest companies are pushing to increase the amount of transparency on the fees banks charge across the services they provide, in an effort to bring Europe more in line with the level of disclosure in the US.
BSB (Bank Services Billing) has been used by US corporates for many years, revolutionizing the way companies can compare and analyse bank charges. However, this service is only just beginning to gain traction in Europe.
The formatting particularly benefits companies with global operations involving a number of currencies, often with multiple banking arrangements worldwide, providing more transparent, easily comparable information that enables treasurers to keep on top of their bank charges.
So far in Europe, Shell has blazed a trail with BSB although more European companies are now looking to adopt the format.
“Ongoing adoption of the Bank Services Billing standard can be seen as a part of the trend towards increased transparency across financial services,” says Hamish Thomas, director in financial services at Ernst & Young. “The appetite on the part of corporates for transparency from their banks is being matched by a willingness at the banks to provide information.”
|Hamish Thomas, director in financial services at Ernst & Young|
Put simply, BSB is a standard format in the form of an electronic statement sent by banks to their clients that enables companies to easily compare fees and charges across their banking relationships. It also provides companies with greater control as the payment of bank services is often decentralized.
“Benchmarking the services of a banking partner can not only be difficult but also time consuming, making it difficult for organizations to analyse the competitiveness of the services offered,” says Pieter Sermeus, associate consultant at treasury consultancy Zanders.
BSB has been up and running in the US for over 10 years, but so far is nascent in Europe. The initiative was developed in the US at the request of a corporate interest group, led by General Electric, to have a more optimized and clearer understanding of their banking fees.
The US financial landscape is far more complex and fiercely competitive than in Europe where, in the past, bank arrangements have been more driven by relationships. But in Europe this is beginning to change and, amid fragile economic growth, cost and transparency are becoming paramount.
The Transactions Workflow Innovation Standards Team, otherwise known as Twist, developed the Bank Services Billing standard to achieve more transparency in the banking fee process, Sermeus adds.
Twist is a not-for-profit industry group delivering standards across a range of financial processes in addition to bank billing. It is supported by a range of organizations from corporate to public administrations to financial services providers to solutions providers.
Lufthansa is currently receiving Twist reports for almost 40 countries worldwide by its two strategic cash management banks – Deutsche Bank and Citibank – according to Twist’s website. Other companies cited as receiving electronic billing are Siemens, Cigna and Deutsche Post.
Shell was invited to comment but declined to do so.
“Besides the potential cost savings because of minimized banking fees, it allows an organization to compare the costs of different banking partners in a more transparent and objective manner, which offers better possibilities for a wallet distribution analysis,” Sermeus says.
“The organization will also have a better insight into its entire banking fee process, which leads to better mechanisms of control and easier compliance with market regulations,” he adds.
The BSB standard is interesting for banks as they can use it to differentiate themselves from direct competitors in terms of servicing and fees.
“The banks have acknowledged their clients' need to closely manage their payments and related bank-provided services, and have also recognized that providing this information well could actually create a competitive advantage for them," says Thomas at Ernst & Young.
As from September 2013, 13 banks are live with BSB for corporate customers according to Twist. Of these, 12 are public about their activities: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Danske Bank, HSBC, Intesa Sanpaolo, JPMorgan, Skandinaviska Enskilda Banken (SEB), Société Générale, Standard Chartered Bank and UniCredit.
Lloyds and Standard Bank have publicly endorsed the BSB standard and have plans to implement it. Four additional banks are in the development or planning stages. One is a global bank and the others are regional banks, according to Twist.
Software vendors are also working on providing systems to analyse bank charges. For example, Hansa Orga, a software and consulting firm for treasury management and bank reconciliation solutions, now offers version 2.0 of its software FinanceSuite eBAM (electronic Bank Account Management), a specialized tool for automated bank fee analysis.
“An increasing number of companies have been approaching Hanse Orga in search of a tool that enables finance and treasury officers to bring efficiency to their international bank fees analysis. Ultimately, companies will be able to better control their bank fees and to reduce their bank service costs,” notes Christos Kiosses, product manager of eBAM at Hanse Orga.