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Making business sense of the financial messaging myriad

Let’s face it financial messaging has never been the most exciting part of banking. Originating in the wire room, it took over from telex and the message boys. But things are changing – quickly. You would think that with the explosive level of development in global connectivity, driven predominantly by the internet reaching every town around the world and satellite communications reaching into the areas once completely isolated, all types of messaging should be getting easier. But somehow some things in the messaging world seem to be getting more and more complex – why is that? And more importantly what should we be doing about it?


Some indicators suggest that overall messaging volumes are falling. However, the big banks have continued to see their volumes increase. Some of course have seen massive growth as a result of the mega mergers over the last twelve months.


Recent market turmoil has also lead to demand for greater control over the business, with banks no longer prepared to wait for information. They want to know where the funds are to feed back to their clients, who are also demanding instant answers. Each request for information depends on a financial message, further pushing up volumes.


On top of the volume increases, comes the mayhem of messaging formats. SWIFT have been trying – for some time now – to migrate their members towards XML-based messaging. But while this will provide benefit in the long run, it has been very slow to gain momentum. There is simply no real business case for a technology change, so the migration will probably only happen as the underlying business systems themselves are updated or replaced. The downside of this is that we are now truly living in a multi-format world, and the impact of this for most organisations is that messaging gets more complex – and costly.


Currently, banks are having to review every aspect of the value chain. With the added complexities of the slow migration to XML and the cost of maintaining a system to support both standards, banks need to reduce messaging costs. In doing so, they have to ensure that their messaging processes are fully automated, their systems consolidated and that operations are managed in real-time. Older legacy applications should also be reviewed as part of the drive to improve client services. Moreover, modern infrastructures also tend to lend themselves to supporting white labelling or in-sourcing from other financial institutions, further reducing the cost per transaction.


And to get even more bang for messaging buck, banks should resist being bound to a particular network provider. While the bulk of messaging today goes through SWIFT, they are not without their competitors. BT Radianz is quickly expanding its foothold particularly for non-critical messages, while other network providers, such as MoneyGram, could potentially open their networks for messaging exchange.  With the continued rise in the power and flexibility of global networks, there simply is no technology barrier to this as there was in the 70s when the current infrastructures were required.  As earlier stated, banks need to be able to exist in the new XML world, so connectivity to other networks should become easier.


It’s unlikely in the foreseeable future that we’ll reach a point where financial messaging is fully standardised. But banks are in a position to reduce messaging costs, while improving the efficiency of their ‘wire rooms’ to deliver business services more closely aligned to customer demands.


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