Appreciating BAI Files [Part 1]

--By Christian T. van Dijk
President, Integra Mortgage Solutions

A Primer for Bank Statement Automation Part 1: Introducing the Standard

Technically speaking, BAI files have been available to companies seeking bank statement automation since 1980*, however; I find it surprising how such a prevalent standard in the banking industry is so widely unknown by many corporate professionals working in financial services (no less!) who could really use them. In an attempt to bridge the gap and potentially add some value to cash operations everywhere, below is a mini-guide to BAI files and its implementation based on my experiences working with the standard in cash management projects for the past 10+ years. By no means is this article intended to provide an exhaustive guide to the BAI specification or offer a master blueprint to its implementation. Hopefully, it can serve as a primer for bank statement automation.

*The specification for BAI v1 was published by the Bank Administration Institute in 1980 in an effort to standardize how banks published balance reporting information. In 1987, the same institution published a revision to the specification in BAI v2 (i.e. BAI2) which still holds as the standard used today. Thanks Wikipedia!

Meet the Standard

Virtually all U.S. banks are capable of transmitting bank balance and bank statement information in BAI format (international support is also available thanks to integration with SWIFT). As a matter of fact, many banks leverage the format and produce a repackaged version of BAI for printed and online bank statements accessible to corporate customers. The most telling factor that financial information is driven by the BAI format is the use of 3-digit codes (i.e. BAI codes) to designate transactions. For example, you may have noticed a code of 475 next to a “Checks Paid” transaction or 275 for a “ZBA Credit”; these are two of the 213 standard BAI codes used to classify bank balances (beginning with 010), credit (110 to 399) and debit (408 to 699) transactions. The BAI standard was developed by the Bank Administration Institute (thus the acronym) in an effort to homogenize the classification and underlying distribution of financial information. Once released, the adoption of the BAI standard was an easy sell for corporate customers for the following reasons:

  1. Standardization of a common format allows a company to consume financial information from multiple banks using the same mechanism to transform BAI data into whichever layout is most convenient to store /present bank statement information.

  2. Standardization of transaction classification via BAI codes facilitates an efficient book-to-bank reconciliation, i.e. the pairing of checks or wires recorded in the book to offsetting bank statement transactions quickly identified by their respective BAI code.

A somewhat confusing fact about BAI files is that there are actually two types: Prior Day and Current Day files (these also go by Previous Day and Same Day or Intra-day files respectively). Each file type shares the exact same structure but serves a different purpose. Prior Day files are primarily used to fuel a system of record for historical bank statement activity and enable accounting activities such as book-to-bank reconciliation. Prior Day files are available on a daily basis and contain all settled bank activity for the previous day it was published (hence the name). Current Day files are more dynamic in the fact that they collect the most recent bank activity as published at the time it was requested. These files are available multiple times per day (some banks publish these in specific “windows” throughout the day while others compile the most current activity at time of request) and are typically used for cash positioning and forecasting. If one were to collect all incremental Current Day files published for a given day (or request a cumulative Current Day file at the end of the day), the contents as far as balances and transactions should match exactly with what is presented in the Prior Day file available the following day. Most companies begin bank statement automation with Prior Day files and only add Current Day files to the process if there is a need for sophisticated tracking of available cash with narrow tolerance as in a trading scenario. Perhaps the most confusing aspect of BAI files is that these enable banking information to be available on a daily basis vs. once per month as with paper statements. This opens a wide variety of possibilities to an accounting operation, among them the ability to (technically) reconcile book-to-bank transactions on a daily basis.

Think of this tidbit of information provided above as small-talk before diving into the business of the matter. Now that we have established some context for the use of BAI files and its virtues, let’s dig deeper and explore the BAI file structure and its implementation.

If you want to know more about BAI files, below are links to the entire series:

Part 1: Meet the Standard

Part 2: Breaking Down the BAI File Structure.

Part 3: Implementation Considerations

Part 4: Are BAI Files Perfect?