Small and large companies alike want more streamlined A/R processes. The driver behind a common standard for remittance information delivery is to enhance the value of and promote the growth of electronic payments in order to improve efficiencies and enable
Earlier this summer, I attended a remittance standards conference hosted by the Federal Reserve Bank of Minneapolis and the Accredited Standards Committee X9. Participants represented the Federal Reserve, ASC X9, ASC X12, SWIFT, ANSI, ISO, IFX, OAGi, GS/1,
vendors and payments industry analysts. I was reminded of the old adage, “The beauty of standards is that there are so many to choose from!” While the market need for a remittance format standard was understood by all, it was acknowledged that the format
and transport mechanisms will take considerable time and effort to define.
Last week at Sibos in Toronto, remittance delivery was again discussed in the context of supporting the extended remittance information in the new Customer Transfer Plus (CTP) message defined by the Federal Reserve Banks and scheduled to be implemented on
November 19, 2011. Financial institutions using the FedLine Direct® Fedwire Funds Service are required to be able to receive CTP messages, but support for sending the new CTP message is optional.
But, what are the implications? As was pointed out during the discussion, the fact that a bank can receive the extended remittance does not mean that it can be delivered downstream. And while some banks will be ready on November 19th to offer a full suite
of tools capable of delivering this extended remittance data, many (arguably a majority) will not.
In addition to the many available (and competing) remittance data formats, the actual delivery of remittance data falls into two camps: in-band and out-of-band. With in-band remittance delivery, the remittance data travels with the payment information.
With out-of-band remittance delivery, the remittance data is stored in a repository separate from the payment information and is reunited with the payment details prior to delivery to the customer.
One of the reasons that checks still prevail in North America is because the remittance data travels in-band, located in the top two-thirds of the paper above the perforation. When discussing the out-of-band solution, corporate customers are adamant that
they do not want the responsibility and burden of reuniting data. They clearly see that as a responsibility of the financial institution providing the service. North American solutions appear to favor in-band transport of remittance data while European solutions
appear to favor the out-of-band approach.
Ultimately, corporates want payment and remittance data delivered together and the burden appears to be on the banking industry to enable straight-through processing and make the receipt of electronic remittance straightforward and simple. This will help
drive the continuing migration towards electronic payments.
I welcome your thoughts on this topic.