The way bank accounts are organized determines how effectively account holders – organizations and private individuals - can carry out their cash management. Two of Jaap’s projects clearly illustrate this.

Societal impact account structures

Prior to the creation of the Single Europe Payments Area (SEPA), Jaap carried out research for the Dutch Ministry of Economic Affairs into the possibility of introducing number portability for bank accounts. This project formed part of a broader social study (MDW-overstapkosten) aimed at reducing switching barriers in various areas.

The study examined the then current account structures of the banks, the possibilities for portable numbers within banks, the impact of introducing number portability and the impact of the Single Europe Payments Area (SEPA) developments. In addition, it assessed the consequences that number portability might have on private and business customers if it were introduced.

Conclusion
The findings of the study were that the advantages of number portability would above all benefit business account holders while private account holders would be the main users. The introduction costs would be reduced if the scheme were only rolled out after the legislation had been in place for a few years. Significant differences in costs between the banks were expected. However, the costs of the cheapest banks and not the total costs should be the guiding factor.

Another important conclusion was that the use of IBAN made European number portability impossible. An introduction of number portability would therefore be confined to account numbers issued in the Netherlands.

The advice was to introduce number portability legislation throughout Europe because the markets (banks, private and business customers) were not able to take the initiative themselves. By making it easy for customers to switch following the introduction of number portability, it was argued that banks would operate in a more client-oriented manner.

In the end, legislation on number portability was not introduced in the Netherlands due to the fall of the government, an effective lobby by the banks and the limited effect from a European perspective. The portability of bank account numbers is a matter that is periodically broached in Dutch and European politics.

Account structure in a multinational company

An international manufacturer and distributor of paints and coatings was obliged to change its cash management bank in 24 European countries for its 40 subsidiaries/entities. In addition to the bank selection, the then current account structure was reviewed and improved. The new bank and account structure was successfully implemented on time and on budget.

At the start of the review, some 400 bank accounts with more than ten different banks were in use. For only a small proportion of these accounts was account information electronically available at a central level on a daily basis. Also, a large proportion of the accounts was not included in the (notional) cashpool. Intercompany transactions were carried out as regular payments.

Improvements
Under the new structure, the organization uses only one working account in the local currency with the selected cash management bank. In addition, an entity can be allocated extra Foreign Exchange (FX) accounts if the respective FX turnover exceeds a predetermined standard amount. All accounts are placed in a zero-balancing cashpool and are transferred every day in favour of a central account of the organization. Thus, every entity has an in-house bank account which is administered in the Treasury Management System (TMS) based on the daily electronic bank statements. Intercompany payment transactions are settled via the in-house bank accounts. For this, a legal structure was established which not only regulated the internal relations but also enabled the central organization to open, close and mutate the entities’ bank accounts. Jaap worked closely with Orchard Finance on this assignment.

In a number of countries virtual accounts of the (external) bank were implemented within the entity. Every customer of such an entity receives invoices with an IBAN to which payment must be made. This account is in reality a virtual account with which receipts can easily be reconciled. Today the organization has less than 100 physical accounts with the chosen cash management bank, the bulk of the accounts has been placed in the cashpool and every entity has one or several in-house accounts, depending on their FX use. In a number of countries, the local regulations restrict the desired account structure, as a result of which multiple accounts are required.