On 1st May 2004, after years of lobbying and preparation, ten new member states joined the European Union - Cyprus, Estonia, the Czech Republic, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia and Slovenia. The impact of this enlarged European Union has been felt around the world, both politically and economically, as new mandates and regulations are rolled out across the evolving landscape.

One such mandate from the European Central Bank (ECB) has been designed to help the new member states join Europe's financial markets on an even playing field. To achieve this, the plan is to create a new infrastructure for processing high-value Euro payments - Target2 - a replacement for the existing Target infrastructure. While the original was a slave to the idiosyncrasies and peculiarities of the individual clearing systems it comprised, Target2 has been designed to provide a Single Shared Platform (SSP) to all users, meaning that there is only one platform to connect to and one set of rules, resulting in little infrastructural change required for existing Target users.

So far, so good.

Unfortunately though for the banks, Target2 delivers transparency which will drive down the cost of clearing and ultimately their revenues. That said, it's not all bad. In addition to its core modules (payments, information and control and contingency), Target2, delivers additional cash management services, which include liquidity pooling, limits, and liquidity reservations. Management of these services can be done manually, but automated access requires SwiftNet FileAct and SwiftNet InterAct, using message types such as the new SwiftNet Cash Management messages to interact with the new cash management services.

Unfortunately however, the infrastructure of many banks will inhibit them from utilising these new services, extending them to their customer base and supplementing their clearing revenues, as many financial messaging systems are currently unable to handle the new SWIFTNet services and solutions without extensive development and re-architecting.

Target2 isn't the only strain on a banks infrastructure. Other initiatives that will come into effect as part of the ECBs Single European Payments Area (Sepa) include plans to convert domestic ACHs into Pan European Automated Clearing Houses (PE-ACH's) aimed at making it as easy to make a cross border Euro payment as it is a domestic payment, which will also raise issues of technical standards and processing systems.

So, there are a number of catches here. Although Target2 can be realised fairly quickly and cost-effectively in its simplest mandatory guise, to take real advantage of the "optional" benefits and attain that critical competitive advantage, most banks will need to undergo system and process re-engineering.

Add in the other initiatives like the Sepa, and it soon becomes apparent that while payments processes are consolidated and rationalised on the outside, they will also need to be re-engineered on the inside if banks are to realise the full benefits that these changes offer. Even with this, there are inevitably still going to be left with silo-based systems that are tied to various existing payment channels and business lines, making management and compliance costly and difficult.

And so we come to the crux of the matter - bank systems and their capabilities. The simplest way to work around the problems is to deploy a flexible financial messaging platform that can: route payment messages to different channels depending on rules and variables such as value and time to value; add functionality and value into the messages it processes; audit and archive all FIN, FIX, FileAct and InterAct traffic; and handle both new SwiftNet cash reporting messages and the FIN payments messages that are currently the driving force behind Target2.

In essence, what you need is a cost effective financial messaging solution that can handle both the present and the future at once, with limited resources and with the capability to expand as your business develops, enabling you to take full advantage of Sepa, PE-ACH, Target2, Step2, and SwiftSolutions well before your competitors can.

It's a dream that can be realised. If you know where to look.