The multi-bank agnostics

More corporate treasurers now say they want easier simultaneous access to several banks and many accounts – and most admit they’d switch banks to get it. SHAYLA WALMSLEY explores the multi-bank models.

The days when businesses had a single account with just one bank are long gone. These days, the model to beat is electronic bank account management (eBAM), which allows treasurers to open, close and control accounts with several banks via a single file sent through SWIFT.

There are three corporate cases for eBAM. The first is managing risk, notably counterparty risk. The second is doing the same for cashflow. Combined, these amount to visibility.

“It’s about having the right document that the bank needs, updated, regulatory compliant, and which ticks all the boxes,” says Tom Buschman, CEO of standards organisation TWIST and former Shell Treasurer.

“It offers value to customers that they can use elsewhere. If, as a corporate, you use the same documents with governments as you do with banks, for example, eBAM makes sense. At the same time, banks can make corporates responsible for their documentation being up-to-date. The company is in control of it and accountable.”

The third case – one equally appealing to banks – is that visibility enables both sides to meet regulatory requirements. “Regulators are becoming quite demanding and issuing fines. If banks can make their customers accountable, they can fend off the regulators,” says Buschman.

But what’s in it for banks – apart from returning the responsibility for documentation back to their customers?

The primary rationale is to do more business, better. “When banks engage with their customers, the aim is to form long-term relationships based on trust and communication from both sides,” says Marcus Treacher, head of e-commerce for global transaction banking at HSBC. “The better banks do this, the better business they’ll do.”

Certainly, they’re investing in automation of on-boarding and service processes – both crucial components of multi-bank offerings. Despite only 21% having committed to investing in automation for 2010, Pegasystems found that this year 64% of banks had in fact committed funds, and 84% had allocated funding for it for 2011.

As the data suggest, many transaction banks are already building portals that take account of the eBAM format. HSBC has developed a multi-bank corporate platform with vendor SAP that uses the eBAM standard – and pretty much every global transaction bank has its own version in development, according to Treacher.

“Our colleagues and competitors are working on the same thing,” he says. “That’s healthy. It means you’re giving corporates a choice. Otherwise we’re offering them antichoice, in a way.”

One indicator of likely success for the multi-bank model is that it’s based not on what banks think corporates want but what corporates themselves say they want – and are willing to pay for. Of corporate treasurers polled by Pegasystems, for example, 62% would consider switching to a different bank for better customer service around onboarding, account maintenance and query handling (up from 44% last year) and 57% would be willing to pay higher fees for a web portal that allowed them to manage their entire portfolio online.

For their part, banks believe it will save them money. Asked about the forecast reduction in operational costs, 44% of those polled by Pegasystems said automation could save more than 30%. Contrast this demand meeting aspiration with the technical difficulty associated with automation. According to Adi Bachar-Reske, senior product marketing manager for wholesale banking at Pegasystems, many banks are worried about their fragmented and manual on-boarding process that would essentially lag behind the eBAM standard.

Given the strong case for both banks and corporates, multi-banking should be straightforward. But this involves switching to a business model that is closer to car manufacturing than to the traditional proprietary banking set-up.

Car manufacturers used to develop everything themselves, inefficiently. Then the automotive industry moved to a model in which the components that went into cars were standardised, sourced competitively and assembled, rather than built. In other words, in the open collaborative model, manufacturers differentiate on the experience of the driver, not on commoditised parts.

“The big change is that banks are willing to adopt non-proprietary solutions. Their customers don’t want proprietary solutions – they want simplicity,” says Buschman.

Multi-banking has been done in the retail space by, among others, Egg – but retail solutions did not involve complex treasury management systems. The early takers for eBAM have been corporates the size of GE, which is building an in-house cross-border treasury system to go with it. John Bullard, global ambassador for IdenTrust, claims banks can profitably look at the segment below top-tier multinationals – at corporates that want eBAM without a treasury workstation product.

He points out that these typically use e-banking interfaces. “It’s up to the bank to roll out the application on a white-label basis. It’s a natural extension of corporate e-banking to have an eBAM capability,” he says.

But can the new collaborative model work? In a sense, it has to. Treacher points out that, as banks have developed better proprietary solutions, corporates have needed those services to determine their cash positions early and globally across several banks. The open model means banks will need to chase the corporate demand for visibility, rather than creating new whizzbang – but proprietary – solutions. In other words, like carmakers, they will have to compete on service and innovation.

And if banks fail to make it work? Perhaps they should keep in mind the two-thirds of treasurers who would happily defect to others that will. Long-term, according to Bullard, the multi-bank capability will be the reason why corporates choose one bank over another.

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