The next wave – migrations affecting payment operations and cash management
Executive Education / 13 July 2021
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Axel Jäger has been a Payment and Cash Management specialist since 1995, as well as a lecturer in the Certified Payment Professional certificate course.

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These days, whenever we hear the term “wave”, we tend to think of the pandemic, and all kinds of restrictions and constraints spring to mind. But in this case, we’re not talking about the next wave of COVID-19 infections, but about far-reaching changes in the world of payment transactions and cash management.

Following the decision to switch SEPA payment transactions from DTA to the ISO 20022-compliant XML format, corporate customers had a lot of work to do in the years prior to the 2014 deadline. Financial accounting and treasury management systems had to learn a whole new “language”; master records had to be modified to use IBAN and SWIFT BIC codes instead of customer account numbers and bank sort codes, and new mandates had to be obtained from customers paying by direct debit. The migration was a major undertaking – one which had to be managed alongside day-to-day business operations.

And yet two areas remain unaffected by this migration, or have not yet been tackled by most customers simply because they have not yet been obliged to do so: cross-border payment transactions and bank statements (MT94x).

Migrating from T2 to CBPR+

Now, as part of the transition away from the ECB-managed TARGET2 platform and the SWIFT infrastructure over to the ISO 20022-ready XML format – a process initially affecting entries in ledgers 1, 2 and 9 (MT1xx, MT2xx and MT9xx) –, these two remaining “legacy formats” are also being replaced. Consequently, corporate customers are facing a new wave of migration. The modifications are due to come into force in a “big-bang” moment in November 2022. Initially, they will apply exclusively to the banking sector – but even so, it is highly likely they will also impact exchanges of data between (business) customers and their banks. This means that bank customers will be obliged to implement yet another migration which, as things stand today, must be completed by 2025. Once again, corporate systems (ERP, TMS and e-banking systems) will be required to implement another technical update, during which they will be subjected to exhaustive tests to ensure they are capable of generating and processing seamlessly compatible data.

So IT specialists, financial advisers and treasury teams can look forward to yet another stressful period – and yet ultimately, all this effort will be worth it. Digital discontinuities in payment operations and especially cash management will become a thing of the past; end-to-end processing based on XML will become the new reality. Loss of data – especially data involving account information – will be eliminated and the automated posting of incoming and outgoing payments further enhanced. The introduction of the ISO 20022 (2019) standard brings further advantages. Up to 9,000 characters can be used to describe the purpose of the payment; individual invoices can be bundled in a single payment order and yet still shown individually. In short, the new standard will elevate the quality and potential benefits of payment transactions to a whole new level.

So watch this space! From dull as ditchwater, payment transactions have become exciting again – the whole field is evolving, and this can only be a good thing. All of us – customers, banks, IT service providers and financial advisers – have a mountain to climb, but once we have scaled the heights, the prospects are fantastic! Our Certified Payment Professional certification programme provides a concise, 360° view of all relevant regulations, both established and impending. You can find further details on our website.