Appreciating BAI Files [Part 4]

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

A Primer for Bank Statement Automation Part 4: Are BAI files perfect?

As you may have gathered from our previous articles on the subject, we are indeed fans of BAI files. They are our go-to solution for Treasury implementations and they help us deliver reliable solutions. However I will be the first to admit and point out that BAI files are actually far from perfect. Below are the biggest gripes I have about the standard and its current implementation:

  1. BAI is considered an industry standard for financial institutions, but many banks have chosen to apply certain “liberties” in the interpretation of the standard, which can present challenges during implementation.

  2. There is great inconsistency in the use of BAI codes to classify transactions. Two different banks may use two completely different codes for the same transactions; this can present a big problem for processes like reconciliation.

  3. It is a good format for the United States, but it is rarely (if ever) used internationally.

What’s the alternative?

Well, BAI files are not the only game in town, but they are arguably the best game in town…. for now.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT), for example, offers a standard called MT940 that is comparable to BAI files, but is mostly limited to Europe. Based on my experience with the standard, it is more consistent than BAI in classifying transactions, but there are fewer classification codes, and identification of transactions tends to be too broad to fuel a robust reconciliation process.

There are also some differences within the SWIFT standard between banks, but these are far better documented than BAI. For example, Deutsche Bank published a SWIFT standard called MT942 that includes some features specific to the bank that is part of the official SWIFT library for other banks to leverage. The real issue with adopting this standard as a solution, at least for U.S. customers, is that getting automated bank statement in SWIFT format for local accounts is not offered by many banks (if any) unless the customer also has international banking needs.

As far as I know, no other standards are available for automating the delivery of bank statement information. There may be some surviving proprietary formats out there, but none with critical mass, thus presenting a good case that they do not matter.

What does the future hold?

Good news (potentially)! There is a new standard currently being formalized called the Balance Transaction and Reporting Standard (BTRS), which is essentially a third revision to BAI. This new format promises to eliminate the shortcomings of current BAI files by focusing on the following features:

  1. Provide a single standard that can accommodate global banking operations.

  2. Eliminate transaction classification codes that are no longer used or used inconsistently among financial institutions and replace these with a new standard set (under ISO 4217) with a meaningful guideline for classification criteria.

  3. Expand use of addenda records to assist customers with business process automation, such as bank reconciliation.

Are you thinking, "Sounds fantastic, sign me up!" Well, it is not available just yet. The Accredited Standards Committee X9 (ASC X9), a standards focused non-profit association made up of members from the financial services industry, has been working on it since 2009. Based on their website, the standard was supposed to be available for general release in Q1 2012. Based on information I received from a couple colleagues representing the two largest banks in the world (that also sit in the standards committee for BTRS), the format is not yet available (at time this article was published) and there is no estimate on when it will be available to customers.

So… there is hope for a better solution, but I will stick to my BAI files for now.

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?