Transparency is critical in any relationship. Unfortunately, there is a long-standing inherent barrier to transparency in every relationship between a bank and a client, the bank analysis statement. Understanding the majority, let alone all of the charges depicted on a bank analysis statement, is difficult at best. I have personal experience with the challenges of understanding bank analysis statements. It took me months and more than one in-person meeting with a group of employees with a bank partner to understand the charges on their monthly bank analysis statements.
Deciphering bank analysis statements became a regular part of my routine. I spent hours each month reviewing bank analysis statements and I often found billing errors. I know that Treasury professionals still face these same challenges. The format and structure of a bank analysis statement are far from consistent across different banks, and the structure of fees and verbiage on the statements for most banks change over time. The good news is that there are resources and technology that can help companies understand and banks deliver transparency in bank analysis statements.
AFP Service Codes and Global Service Codes
The Association for Financial Professionals (AFP) created and manage the AFP Service Codes©, which have served as the industry standard codes assigned by all major banks to their cash management services billed to companies since 1986. The AFP Global Service Codes© were created in 2011. The global codes were designed specifically for the international community. Unfortunately, many banks still do not leverage the AFP Service Codes© and/or the AFP Global Service Codes© on their bank analysis statements. Even if a bank leverages both code sets and assigns them correctly, the volume of bank statements and services consumed still makes benchmarking and managing bank fees from even a single bank cumbersome. Proper assignment of the codes by banks on bank analysis statements would allow Treasury professionals to perform analytics, cross-bank comparisons, and manage bank fees effectively.
Bridging the Gap in Code Utilisation
Unfortunately, most Treasury professionals do not even know that both code sets exist, let alone how to leverage them to benchmark and manage bank fees. Companies should collaborate with banks in understanding each line in a bank fee analysis statement and look to them to help in assigning services to the right AFP Service Codes© and/or on AFP Global Service Codes©. Some banks offer AFP Service Codes© and/or on AFP Global Service Codes© on analysis statements for categories of fees, but these codes can still be assigned incorrectly.
There have been recent updates to the AFP Service Codes and the AFP Global Service Codes. An update was done to the AFP Service Codes© in 2020 and left only 32% of the existing codes unchanged, and an update to the AFP Global Service Codes© in 2023 modified or added half of the codes in this release. Even before these comprehensive code updates, it was not uncommon for banks that attempt to use either set of service codes to assign more than 40% of them incorrectly. Therefore, the potential for the misassignment of codes by banks on analysis statements and the challenges of understanding and benchmarking bank fees has become greater for treasury professionals over the past few years.
The Future of Bank Fee Management
The good news is that there are bank fee analysis solutions that give users access to an unprecedented range of datasets to help them evaluate and benchmark the costs of their banking operations across the globe. This empowers companies to identify inefficiencies, eliminate redundancies, and benchmark and manage bank services while removing an inherent barrier to bank relationship management success, a lack of pricing transparency. Companies need to understand what they are being charged by a bank partner to determine the value of that bank partner. Deciphering bank analysis statements is crucial in this process.
Also Read
- Maximizing Your ROI to Attending a Conference
- Do You Have a Contingency Plan in Treasury?
- Visa to acquire fraud detection company FeatureSpace?
- Junior Treasurers Interview: A Session with Sean Howlin
- Understanding Project Nexus: The Future of Cross-Border Payments
Join our Treasury Community
Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below.
