News and resources on payments systems, innovations and initiatives worldwide.
EBAday 2022: Going instant with ISO 20022 and liquidity management

EBAday 2022: Going instant with ISO 20022 and liquidity management

Diving-in to day two, Joost Bergen, owner, Cash Dynamics, kicked off the ‘Real-time liquidity management’ session with the poll question: do we really need liquidity management close to real time?

Bergen stated that while its “all great to talk about instant payments and data, at the end of the day it’s all about liquidity.”

With 80% of the audience responding ‘Yes’ to the poll question (just 20% selecting ‘Not always, as there are several downsides’), Bergen asked the panel to share their thoughts around the responses.

Mario Mendia, SVP international markets, TAS Group, stated that there are a few factors driving change toward real time. Not only are all electronic payments increasing in importance, but there is a “push for the banks to manage their liquidity in real time, and therefore they need to incentivise corporates to meet same standards.”

On top of these factors, are the future trends toward IoT and supply chain management, where payments are likely to be completely automated.

Stating that we should consider the question from a different perspective, Krister Billing, market infrastructures and regulatory affairs, SEB, questioned whether we really we need real-time all the time.

Billing argued that we can’t just look at a single perspective such as considering liquidity on its own. “Organisations need to be able to deal with its technically and organisationally.”

This prompts a number of important questions tied to how we adopt a more realistic approach to the journey to real time. “Liquidity is key, its where payments start and end. But we need to think about the cost of change and the journey to get to these final costs,” added Billing.

Ilkka Korkiakoski, head of payments, Tietoevry, suggested that while real time liquidity may allow a bank to understand the finance of a value chain, “do you really need to manage bank accounts instantly? Or, is it enough to understand the data which enables you to understand your business situation in real time?”

“We should not look at liquidity in isolation, we should look at the value chains of business processes which are becoming more and more real time, and that requires automation,” continued Korkiakoski.

With the automation of business chains and processes, banks naturally need more real time data, but this doesn’t necessarily mean that it is essential to have a real-time monetary system understanding.

Addressing the potential downsides of real time paymenst from a liquidity perspective, Priyanka Rath, managing director, head of global liquidity and accounts solutions specialist, J.P. Morgan Chase, explained that every payment starts and ends with liquidity.

“Never should a payment fail for a lack of liquidity. As we’re moving toward an increasingly real-time, embedded, integrated ecosystem, liquidity management has to keep up.”
“Do we need it? Absolutely […] Are we there yet? Not quite.”

As financial institutions still have to work within the premises of clearing systems’ cut off times, technology can be a real friend in trying to navigate the landscape.

This is particularly striking in the post-pandemic world, Rath added, as everyone understands that e-commerce is the key objective.

“Treasurers, don’t just have their own cash to manage or transact with, they have to manage other people’s cash. The cash that their businesses are dealing with is third party money, it’s the cash of their customers. That is instant, real-time because their customers want to pay instantly and with the click of a button […] As an industry we have work to do. But the world is going toward real-time, instant payments. We have to make sure that real-time liquidity has that ability to make instant payments.”

Following the real-time liquidity management session, a fresh panel of industry experts took to the stage to consider ‘New business models with ISO 20022.’

In a slightly controversial start to the session, Annelinda Koldewe, product area lead channels and reporting, ING, explained how enriched payment data can better serve customer needs in the future.

“To me, ISO 20022 is just another format - some people believe the richness of data will be the goldmine. But, because of the presence of GDPR in Europe, the actual monetisation of this data will be a stretch for us.”

“That said, I do believe the introduction of ISO 20022 will provide a benefit to us as a business. It will really help us get better at processing international payments, helping our clients process them faster, and will allow corporate clients to get more information on their bank statements which will help resolve reconciliation issues. While I think there will be a positive impact on business, I don’t think it will change the basic business model of us providing payment services.”

Francis De Roeck, head of industry engagement for payments, global cash management, BNP Paribas Fortis argued that the key benefits of ISO 20022 are that it help to make payments fast, cheap and transparent for banks.

Going further, Domenico Scaffidi, vice president, global industry and regulatory affairs, Volante Technologies, said that ISO 20022 is not just a standard.

“We believe, we needed to build a new service - changing the way we bank on top of the technology. We’re investing a lot in the cloud to mitigate and help fluency of ISO 20022 […] Thanks to ISO 20022, we know that real time is something that will come if we consolidate liquidity.”

There remains a lot of fragmentation around banks which are highly motivated to push ahead with their ISO 20022 mgiration strategy, and those which are relying more heavily on translation services, explained Julie Guetta, head of payments strategy, RedCompass Labs.

De Roeck agreed, adding that while these banks may be able to get away with translation services for the time being, they’re leaving behind a huge amount of unlocked potential that ISO 20022 holds.

Koldewe also noted that with respect to this “like for like” tendency, she is curious to see how true ISO 20022 migration and the adoption of richer data is going to evolve between now and 2025.

Comments: (0)