The Key to Gaining and Keeping Corporate Treasury Business

By Dan Gill, CTP, Senior Director, Redbridge Analytics

Dan Gill, CTP, Senior Director, Redbridge Analytics

In recent years, we have witnessed unprecedented changes in the core business of banking in nearly every region of the world. Decreasing spreads on interest rates and revenue squeezes due to regulatory changes particularly in the retail banking sector have caused many financial institutions to search for additional areas to enhance revenues. For many, this has meant moving deeper into treasury and cash management services. While offering these services often comes at a significant cost in technology, these costs can be quickly recovered through directly or indirectly billing for treasury services back to the corporate users. From a corporate treasury perspective, the vendor partnership that exists between a company and its banks is essential. Unfortunately, many banks leave their corporate treasury customers underserved by not providing sufficient transparency into the services that are being purchased and the associated fees for those services.

“If a bank desires to remain competitive in the large treasury services space, they will need to provide access to accurate usage and fee information”

Successfully serving the needs of corporate treasury means more than simply providing fast and accurate transactions. Treasury needs to have complete visibility into the volumes and costs associated with managing their cash through their banking partners. This transparency has long been available in the US through the use of the EDI 822 transaction set. A bank looking to maintain corporate customers in the US simply must have the capability of providing their bank fee information into this format. However, even with great technology advancements, global companies are still left wondering what services are being used and what fees are being assessed with their global banks. In the year 2017, it is unfortunate that corporates cannot know the usage or costs of the services provided by one of their most important vendors, their banks.

The New Lingua Franca

Considering the sheer volume of services used, banks need a standardized and electronic way to report the service usage and cost information to their corporate customers. Fortunately, such a standard now exists and is becoming well established in the corporate banking market. A relatively new Bank Service Billing file format can now be used by any bank to report service usage and fee information, as well as balance and earnings information to corporate treasury customers. The ISO 20-022 “BSB” format—known as the camt.086—provides banks with an easy to use, XML based file format to report all of the necessary information to their corporate customers in a standardized way, in any currency or region of the world.

The BSB file format allows for the reporting of the bank fee billing information for any number of accounts in a monthly statement format that can be translated by treasury software that is built to translate these standardized monthly bills. When treasury is able to understand how they are using the bank’s services and the cost of their global cash management operations they become better customers. Since treasury groups do not typically have access to information regarding the services they use and the fees they pay, the relationship with their banks can often become strained. Removing this strain is the main reason that the camt.086 BSB format was developed and is a strong reason why all banks looking to serve the mid to large cap corporate market should invest in providing this information to their customers.

Chronicling the Journey of camt.086

The history of the camt.086 BSB file format is an interesting one and points to the contentious nature of the relationship between corporate treasury and their banks. In 2006, General Electric banded together with the treasurers at more than 100 other large multinational companies and presented petitions to Europe’s largest banks demanding a new electronic bank service billing file format. This new treasury group joined with several banks and a treasury standards organization called TWIST to build the first XML based bank service billing file format. This format became known as the TWIST BSB and is still in use by a number of banks today. In 2010, as the ISO 20-022 financial reporting standards gained acceptance and traction in the European market, an effort was made to translate the first generation TWIST BSB into the more formal and standardized ISO-20022 schema. This work was completed in 2012 and the new BSB format was officially given the designation of camt.086.

While both the TWIST BSB format and the camt.086 are viable alternatives for reporting bank service billing information to corporate treasury, the camt.086 format is a better alternative for banks looking to start. Since camt.086 uses the growing ISO 20-022 schema which has already been used for many large initiatives like SEPA its adoption within a bank can be easier to accomplish since file structure and field naming are already well established. The camt.086 will also be the only version of the BSB format that will receive future enhancements as banks look to increase their reporting capabilities.

Course of Action

The market direction is becoming clear. If a bank desires to remain competitive in the large treasury services space, they will need to provide access to accurate usage and fee information for their cash management customers. This will certainly mean developing monthly electronic bank service billing information for their customers in the camt.086 format. For banks that do not already have an established ISO 20-022 team, or where the complexity of global billing within the bank makes building this reporting a significant challenge, I recommend a two phased approach. The first step is to evaluate how service usage and fee collection is handled in each region that the bank serves. This knowledge will help the bank’s management determine a course of action and plan to roll out bank service billing across the entire enterprise, or to focus on specific regions first.

The second decision that needs to be made is what format to report the data in. The camt.086 is the far and away standard that should be the long term goal, in some banks this can be a significant development effort. In these cases, I recommend that banks first take the step to build a simple csv or Excel based service reporting format that can report the core information for service usage and billing on an interim basis, while the bank builds towards the ultimate requirement of global bank service billing using the camt.086 bank service billing format. If delivering bank service billing information to your cash management customers is not already under development, it needs to be added to your 2017 roadmap.

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