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Could Blockchain Streamline Bank Fee Analysis?

  • By Andrew Deichler
  • Published: 5/10/2017

NASHVILLE, Tenn. – During the latest meeting of AFP’s Treasury Advisory Group, attendees explored potential uses for blockchain and distributed ledger technology (DLT). Tom Hunt, CTP, director of treasury services for AFP, floated the idea of using blockchain to streamline the bank fee analysis process, which are a major point of frustration for corporate treasury professionals.

Hunt began by touching on Microsoft’s blockchain solution for trade finance. “I saw a parallel with banking; it’s very decentralized, and you have a lot of different players and different relationships,” he said. “Why couldn’t we explore the possibility of using blockchain for account analysis?”

Hunt noted that in the United States alone, there are more than 2,500 AFP service codes. There are so many codes because there is no consistency in the ways banks charge for services. The onus is typically on corporate practitioners to do all the analysis, and it’s typically through manual processes. For large corporates with a multitude of banking partners, that’s a massive headache.

That’s why Hunt believes a blockchain solution could help. AFP is currently in the process of putting together an exploratory meeting with banks, practitioners and blockchain experts to discuss the pain points and see if all these different groups could find some common ground.

However, there would be some hurdles such a solution would have to overcome. Hunt noted that bank fee analysis typically gets “the last tier of technology support” at banks. As such, banks may be reluctant to invest in new technology to improve the process.

But even if banks are willing to get on board, they may ultimately determine that it’s not worth the effort. Guy Berg, vice president of the payments, standards and outreach group for the Federal Reserve Bank of Minneapolis, noted that some banks that have experimented with pilot implementations of blockchain to replicate their current legacy systems  are finding that it’s “too costly and too transparent” for their comfort level.

 The transparency issue could be the biggest hurdle, noted Craig Martin, director of executive programs and treasury practice lead for AFP. Microsoft’s trade finance product and many of the other blockchain proofs of concept that are being explored are closed loop solutions. “The Microsoft letter of credit deal is their vendors and them,” he said. “There’s no one else.” Thus a solution that goes across all banks would require a greater level of trust that perhaps isn’t there.

Additionally, as Magnus Carlsson, manager of treasury and payments for AFP noted, revising the service codes and bank fees would be a huge undertaking on the bank’s part, and that’s not likely to happen unless there is a major demand from corporate clients. But that would in turn require a lot of work on the corporates’ part as well to research the analysis process and pinpoint areas where it could be improved.

On the other hand, perhaps introducing new technology into the process is overcomplicating the issue. As Treasa Fitzgibbon, managing director and treasury sales manager for Bank of America noted, perhaps treasurers and banks could simply work together to just reduce the number of codes out there. “Maybe we could just go from 2,500 down to 500,” she said.

Either way, treasury professionals could clearly use some help with the bank fee analysis process. Hopefully it will come, sooner or later.

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