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Remittance Coalition: ISO 20022, B2B Directory Are Coming

  • By Andrew Deichler
  • Published: 6/16/2016
MINNEAPOLIS -- Wednesday during the second day of AFP’s latest Treasury Advisory Group (TAG) meeting, Claudia Swendseid, senior vice president of the Federal Reserve Bank of Minneapolis, provided attendees with an update on the Remittance Coalition and two key areas that the group has been focusing on—ISO 20022 implementation and the B2B Directory.

ISO 20022

A key issue that the Remittance Coalition has recognized is that there is still a lack of understanding among corporates and consumers about the ISO 20022 standard. In response, the group has put together a guide for corporations, banks and the public to educate them on ISO 20022.

It is important that corporate treasurers understand the standard, because the United States is making a concerted effort to move to ISO 20022. “The U.S. is now working to implement ISO 20022 message standards in the payment infrastructure,” Swendseid said. “The Clearing House and the Fed have announced that they will move to ISO 20022 for wires by 2020, and it will be required that financial institutions support that change.”

Swendseid noted that this does not necessarily have to affect corporates, as banks can do a lot of translation for them. “But my point is that the U.S. has now created a roadmap, and it’s moving forward. The wire infrastructure will be the first infrastructure to abandon its proprietary formats and move to ISO 20022,” she said.

As for lower value ACH payments, NACHA has yet to determine when it is going to move to ISO 20022, but it has an active workgroup looking at that. “So unlike a couple of years ago when there was no [ISO 20022] roadmap in the U.S., the U.S. financial industry has developed the roadmap. Wires are moving, and ACH will come after that,” she said. “This could create opportunities for global companies to streamline some of their processing with their bankers. Because if you’re an international company, there are lots of processes that you could streamline. Banks could do all sorts of translations for you, but they charge you for that, and rightly so.”

Looking ahead, Magnus Carlsson, AFP’s manager of treasury and payments, noted that virtually all new payments initiatives, such as the real-time efforts being put forth by the Fed’s Faster Payments Task Force and The Clearing House will almost certainly involve the ISO 20022 standard. “Anything new that comes out, will almost certainly be with this standard,” he said.

B2B Directory

Swendseid also provided an update on the progress of the Remittance Coalition’s B2B Directory project. She began by reiterating why the directory is needed. For a payer to send a vendor a paper check, all you need is their mailing address. But to send an electronic payment, you need more information.

The directory is essentially an electronic phonebook, with one key difference: it doesn’t contain information. “Financial institutions with payee information will be connected to it, and that payee information will be formulated into what is called an electronic payment identity,” Swendseid said. “So if you, as a payer, need to look up one new trading partner, you can send a query to this central hub and it asks all of these bank nodes that are connected if they have an electronic payment identity for this business. The bank that has it sends it back, and it gives you the information you need.”

The information it presents to the payer isn’t bank account information. Rather, it lets the payer know what kind of payments the payee accepts and other details so that they can send electronic payments in a secure way. “All of that would be in this phonebook,” Swendseid said.

Looking forward, the Remittance Coalition is forming a directory association. “We have set up an account, a tax ID and we’re beginning to form a board,” Swendseid said. “The plan is, by the end of the year, this legal infrastructure and the board will be formed, and probably the first thing they’ll do is hire a federated node to start building the infrastructure so that financial institutions and other payment service providers can begin connecting to that routing capability.”

Carlsson said he is encouraged to see the B2B Directory finally moving forward; establishing an association makes the project more tangible. “It’s becoming real; it’s coming, and that’s real progress,” he said. “There has been so much work leading up to this; I think for the past three years, we have talked about the B2B Directory.

Carlsson noted that the idea for the B2B Directory first came about with the 2013 AFP Electronic Payments Survey. One of the key findings of that survey was that the main barriers that were keeping corporates from moving to electronic payments was due to their trading partners not wanting to share information. “So that struck a chord with me; if we can address this barrier, there would be a much greater possibility to finally make this switch,” he said.
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