True Believers, AFP Corporate Members Want a True BAI Standard

More than 80 percent of corporate practitioners who responded to a recent Association for Financial Professionals survey said they would like to see the BAI cash reporting format standardized across banks.

The survey, published in June, has added an extra layer of context and corporate input to a process that already is under way to update the industry standard for cash management reporting. The goal is to create a more uniform approach to cash reporting than what is offered by the format in use today. The format was last overhauled more than 20 years ago by the Bank Administration Institute (BAI).

The Accredited Standards Committee X9, out of Annapolis, Md., convened a working group last year to take BAI's format and create an updated, more efficient standard. The group is still working and ASC X9 could publish a document by AFP's Annual Conference in San Antonio this November, said Jim Willis, senior business manager for banking initiatives at SWIFT who is helping lead the effort to update the standard.

"Reading (AFP's) survey, it's quite clear that the community is looking for the next release of this standard," Willis said. "Since this BAI Version 2 was just a code list and suggestions as to a format, it was not a true standard. It led to a great variety of interpretation as to exactly what the information meant, and how it was to be presented. It's like if you were going down the highway, and stop signs were different shapes and colors and sizes."

Not surprisingly, that has led to a great deal of confusion among corporates, who use the format for a variety of purposes, most often for current or previous- day information reporting. Disparities among banks also have made it difficult for corporates to process that data automatically, leading to costly manual intervention.

The current BAI format dates to 1971, when the BAI created the format's predecessor, called the "Lockbox Communications Standards for Banks." Those standards, as their name suggests, supported only lockbox reporting. BAI released the first version of the BAI format -- BAI Version 1 --nine years later, in 1980.

In 1987, the BAI Version 2 replaced the first version of the BAI format. The format was updated to include codes for certain lending transactions in 2001, but the BAI Version 2 that was adopted in 1987 is still, more or less, the standard in use today. Rights to the BAI format were transferred to ASC X9 last year, with the help of SWIFT.

"BAI had not maintained the document that they originally produced and were somewhat looking for a venue for long- term management of the document," said Cindy Fuller, executive director of ASC X9. "So X9 stepped in."

The working group plans to complete work by September of this year, and introduce a new standard in San Antonio this November, Willis said. Adoption will certainly take years, but, Willis added, "Both large corporations and small corporations, when they're getting their information, will know that it's coming in a consistent form whether it's coming from the U.S., Germany or Mexico."

Some 84 percent of corporates who responded to AFP's June survey support ASC X9's effort to standardize the BAI format, which, despite its issues, remains the industry's cash reporting standard.

The survey found that 87 percent of corporate practitioners use the BAI format for current or previous day information reporting, and 72 percent for controlled disbursements and account reconciliation. Some 54 percent of corporate respondents to AFP's survey use the format for lockbox/receivables reporting, while another 29 percent use it to manage liquidity. Corporates surveyed also reported using the format for account analysis, cleared check review and electronic funds transfers.

Most corporates take the information from an online banking portal, and feed it directly into a treasury management system or an ERP system. Many, though, still must manually intervene to make sure everything is in its proper place—a process that is both time-consuming and costly.

Among corporate practitioners who responded to the survey, 65 percent automatically feed the information into back-office applications. Another 28 percent manually upload the information, and 12 percent re-key the information into an Excel spreadsheet

That is hardly surprising to David Repking, the Global Information Product Manager for J.P. Morgan Treasury Services who is helping lead the update effort. Corporates who have only one banking partner are probably fine with the current BAI format, Repking said. Others suffer.

"Inconsistencies of the standard occur when clients have multiple banking partners and/or when they conduct business outside of the United States," Repking said, in an e-mail. "Through the years, banks created unique interpretations of the standard and added their own custom codes, which created variations across the industry. The clients' goal of an automated, straight-through process for cash management reporting is defeated by such variations that oftentimes result in manual exceptions."

Of course, updating the BAI format and replacing it with an ASC x9 standard also will mean updating the codes. A new standard likely will include SEPA transactions, for example, and should separate International ACH Transactions, or IATs, from domestic ACHS. Corporate practitioners surveyed by AFP suggested that a standard should cover those transactions and others, including e-payments, investment sweep credits and debits, remote deposit- capture deposits and inter-company transactions.

Fuller said ASC X9 also will support rolling updates of the standard every 18 months or so, to keep up with corporate needs in the fast-moving 21st century.

"What we did in 1987 was great in 1987," Willis said, "but the world has moved on."