Corporates catch on to ISO 20022

It is reasonable to say that historically, standardisation in financial messaging over electronic networks has been driven by SWIFT on behalf of the banks – initially FIN MT messaging (based on ISO 7775 and 15022) and more recently MX (XML messaging based on ISO 20022). Predominantly this has helped drive standardisation of formats for transactions relating to international payments, trade or FX leading to increased efficiency for banks via higher STP rates and of course, reduced costs over time.

Increased regulation coupled with the drive for a modern internationally agreed language, has now seen a major rise in the use of XML formatted messaging and, under the direction of TC68 (Technical Committee 68) of the ISO organisation, the formal registration of ISO 20022 standards for financial messaging.  With SWIFT as one of the certified registration authorities, ISO 20022 XML messaging is being heavily adopted by banks both large and small. Indeed for the funds industry, ISO 20022-based SWIFT MX messages have been mandated to replace some FIN messages for funds industry by November 2015 (MT502, 509, 515).

So how is this move towards XML-based messaging impacting corporates, in particular corporate treasuries? 

In the mid-2000s SWIFT (allied to the creation of the SWIFTNet IP-based network) began to offer corporate access to the SWIFT network. Initially designed to enable treasurers easier methods of making payments, ie through use of the MT101 for payment initiation, services have widened to include enhanced electronic cash reporting and balance checking, and of late, EBAM (Electronic Bank Account Management), trade finance related services, and corporate actions.

These services are ultimately powered by ISO 20022 messaging standards. However, the flexibility of ISO 20022 formats means variations can and do exist.  Within the SEPA initiative to harmonise standards for payments related business in Europe, an agreement on 15 ISO 20022-based messages was made. Despite this, local variants exist; for example, in Germany a variant pain.001.002.03 has arisen. With the right tools however, organisations can manage these variants successfully. Nevertheless, having global agreement on particular formats does of course make life easier.

The Common Global Implementation, or CGI group*, founded in the summer of 2010, was designed to help drive global agreement and best practice on ISO 20022 standards for corporate to bank/bank to corporate communications. The organisation continues to make excellent progress in driving global harmonisation within this space. CGI-MP has 4 working groups covering payments, cash management/reporting, direct debits/mandates and bank account management and as the CGI name suggests, these groups look to formulate common rules and usage guidelines for the use of the applicable ISO 20022 messages. Lately it was announced that 100 major organisations have signed up to the group. Two-thirds of members are non-financial institutions, with corporates making up over 20% of the membership.  To underline how corporates are catching on to ISO 20022, the majority of these organisations have signed up to the group over the last 2 years.

Major organisations are now beginning to see the potential of ISO 20022 messaging. Back in Q4 2012, SWIFT reported over 1000 corporates connected to the SWIFT network (both for payments and funds related activity), and SAP have built the Financial Services Network (FSN) designed to offer easier connectivity between banks and their corporate customers. SAP has based their messaging platform on CGI-MP formats. With a common communication channel to multiple banks, corporate treasurers are recognised to be rationalising their banking relationships, improving the quality and timeliness of cash reporting and cash management, and increasing efficiencies in making payments by adopting a bank agnostic standard.

So it is fair to say the evolution of ISO 20022 standards continues apace and it’s not just banks that are driving the change; corporates are playing their part too.

* The CGI group was renamed CGI-MP, CGI-Market Practice, in April 2014.