What is the latest in payment connectivity and format?

January 24, 2020

by Thomas Knudsen Senior Manager

Email +44 (0)7595 850102

by Obi Odili Manager

Email +44 (0)7483 421918

This is the second blog in our series following our recent client payment event. This time, we pick up on key developments around how corporates connect to banks, have visibility of their payments and the formats used.

We have noticed a number of key trends in this space that we believe the treasurer can take advantage of:

  • Alternatives to use of SWIFT: Many corporates continue to join the SWIFT network to connect to multiple banks around the world, adopting the XML format for their payments and transmitting them to their banks using the SWIFT FileAct protocol. However on the back of the Open Banking initiative, we are also seeing alternatives emerge as FinTechs increasingly offer API-based solutions for corporate payments and bank reporting.
  • Open Banking: From our discussions with banks, we notice a shift in their focus. They are moving from getting compliant with the Open Banking requirements in PSD2 to setting up the infrastructure that allows them to use other banks’s infrastructure in their bank’s own product offerings. We believe it will be very interesting to follow how the banks pick up on these business opportunities while other banks and FinTechs increasingly use access to the bank’s own systems to offer products and services to the bank’s customers. In our opinion, banks who follow a defensive approach to Open Banking risk becoming lower margin ‘network companies’ as customers are attracted to more value added offerings.
  • Use of SWIFT GPI: In terms of openness of banking, banks are telling us that there is a surge in the volume of payments that can be monitored using SWIFT GPI. SWIFT also offers corporates the capability to pull the GPI data themselves to enable payment tracking without relying on their bank’s systems. Corporates can also benefit from incoming SWIFT payments notifications. We think this creates some exciting opportunities if you receive larger volumes of cross border payments and want to optimise your processing and liquidity management.
  • XML Payment Formats: SWIFT are seeking to replace MT messages (e.g. MT 101 and MT940) with XML, focusing initially on transitioning cash management messages between banks. While some treasurers may sigh in relief that corporates are currently out of scope, you may still need to consider how this will impact you. For example, you might be relying on your bank or a SWIFT bureau to make payments and collect statements, using a bank’s SWIFT BIC address. SWIFT will provide a conversion service up until 2025 but if banks start sending XML bank statements with much richer data between them, your valuable transaction data could get lost in truncation when converted into the character restricted MT messages before the data is sent to you.

So a lot going on and many opportunities but also a few challenges for the treasury community. Do get in touch with us if you want to explore these topics further.

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What is the impact of real-time payments to the corporate treasurer?

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Email +44 (0)7595 850102

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Email +44 (0)7483 421918