While much of the conversation is around bank’s implementation of ISO 20022 and how payment services providers can support this, corporates are a key stakeholder, driving adoption of the new format and ensuring that they leverage the full spectrum of benefits.
Now versus later
The first step is to work with financial institutions to understand how they can incorporate the new fields and leverage the additional information to automate reconciliation and streamline their supply chain management
It is important for a corporate to differentiate between the key requirements pushed by the regulators and the breadth of the benefits they can get when fully utilising new available fields in the payment message. The use of the additional data will provide opportunities to automate receivables, streamline supply chains and improve payments reconciliation, which will in turn lead to cost reductions through efficient processing and reduction of fraud rates.
ISO 20022 transforms raw payment information into strategic insights, enabling treasurers to develop more sophisticated forecasting models and optimise working capital with greater precision. Its universal language will also eliminate some cross-border barriers, enabling visibility into international transactions and smoother operations across the board.
To leverage these opportunities, corporates might be required to rethink their payment workflows, ensuring that correct data is retrieved from their internal systems and injected into the payment message. “The first step is to work with financial institutions to understand how they can incorporate the new fields and leverage the additional information to automate reconciliation and streamline their supply chain management,” explains Rossana Thomas, vice-president, general manager, enterprise payments platform, digital payments platform at Fiserv.
Create capacity through partnerships
Victoria Blake, chief product officer at GTreasury, agrees that the route to success lies in strategic partnerships. “Partner with technology providers that have experience working with financial institutions on ISO and have more advanced connectivity frameworks that can harmonise ISO 20022 messaging across diverse banking networks,” she advises. “Getting that right will yield a unified data experience that transcends regional variations.”
Partner with technology providers that have experience working with financial institutions on ISO and have more advanced connectivity frameworks that can harmonise ISO 20022 messaging across diverse banking networks
ISO 20022 represents a significant learning curve for treasury teams that must master new data structures and analytical capabilities, which requires investment in training as well as expert support.
Some corporates face a key challenge: payment systems built over decades often include large portions of custom code, creating a major challenge for new messaging format adoption. “For corporates with subsidiaries in different countries, this task can be particularly challenging due to the dispersed nature of their data,” says Gil Guillaumey, senior vice-president and head of capital markets technology at Nasdaq. “Moreover, the need to store and retrieve omitted data during conversions adds layers of redundant activities and necessitates secure data-storage solutions.”
The format transformation from MT to XML ISO 20022 formats is not a complicated transition for a treasury or payments system vendor. In most cases, it is an automated translation managed within the software platform. However, where some corporates may encounter difficulties is if they have downstream processes that have been hard coded to the MT formats. For example, processing and reconciliation of bank statements within their ERP system. “In these scenarios, corporates may require translation back to the legacy messaging types to minimise impact on their internal systems,” notes Bob Stark, global head of enablement at Kyriba.
Standardisation, but with some nuances
For multinationals, it is important to understand that Swift, Sepa, Chaps and the Fed all have their own nuances to message formatting. That is the view of Jerald Seti, vice-president of product management, financial services at ION Treasury, who notes that there is no universal standard for corporate-to-bank messaging.
Where involvement from the bank is required, such as testing the new file format, some corporates are finding it difficult to get technical support from some of the banks. Some banks leverage MySwift or provide self-service portals, but others require sending test messages back and forth via email, requiring manual intervention on both ends. Inconsistencies and accuracy of the data included in the payment message were some of the obstacles faced by corporates engaged in this process.
Potential high implementation costs on the corporate side for any major changes of their technical infrastructure is another challenge, as suggested by Andy Lilley, managing director of invoice-to-cash at BlackLine. “Many corporates also lack the internal expertise needed to handle richer data sets,” he says. “Automation helps by offering a scalable solution for mapping legacy payment formats to ISO 20022 without costly system overhauls, standardising and cleansing data to ensure seamless payment processing and providing intelligent reconciliation tools that automatically extract, classify and match payment data.”
Proven benefits
For treasury teams adopting ISO 20022, it is an opportunity to enrich their payment and reporting flows with useful data. Some of the successful use cases include enriched remittance data, and simplifying and automating back-end reconciliation for suppliers.
“Furthermore, the increased data banks are making available in the CAMT 053 and 052 reporting messages compared with MT940/942 enables greater automation of bank transaction tagging, processing and reconciliation to free up cash and improve liquidity performance,” says Kyriba’s Stark.
Blake at GTreasury describes the transition as a unique opportunity for treasurers to transform their approach to managing payments data and gain real-time visibility across their entire financial ecosystem. “If treasurers can automate routine tasks like reconciliation, payment tracking and reporting, they can redirect more of their focus toward business optimising initiatives,” she says. “ISO 20022 migration needs to be thought of as more than a technical upgrade – it is also a strategic inflection point and getting it right will mean delivering more organisational value.”
In this series:
