SWIFT today announces the publication of a new paper discussing opportunities for banks to streamline their internal routing practices.
The paper highlights how some banks used the transition to SEPA as an opportune moment to simplify their internal routing practices - and how upcoming initiatives may present similar opportunities.
The arrival of the Business Identifier Code (BIC) and International Bank Account Number (IBAN) were key tools in standardising payment transaction formats for SEPA. However, the approach taken by different banks in adopting BICs and IBANs varied considerably. While many took the straightforward approach, others took the opportunity to clean up their account numbers and bank codes first.
In practice, this meant implementing centralised account management and payment processing, rendering obsolete the practice of internal payment routing to branches. The paper explains that some banks have opted to replace multiple BICs with a single BIC serving the entire institution, leading to a significant reduction in the number of BIC codes used in SEPA payments over the last couple of years. At the same time, the IBAN-only rule has recently moved the responsibility for providing a BIC from the consumer to the bank.
“Financial institutions are increasingly seeing the advantages of simplifying their routing data,” explains Hervé Valentin, Head of SWIFTRef. “From lowering costs and reducing customer frustration to improving straight through processing rates and increasing efficiency, institutions can benefit in a number of different ways.”
A project of this scale can be difficult and costly - so the most practical approach is to tackle it at a time when the bank already needs to re-engineer its payment processing application for another purpose. “While the original SEPA migration has been and gone, other upcoming initiatives may present similar opportunities to simplify routing data,” concludes Valentin. From the SEPA Instant Credit Transfer (SEPA Inst) to the SWIFT global payments innovation (gpi) iInitiative , this paper explores how initiatives currently in the pipeline could give banks another chance to review this area.