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Payments Technology: It’s a People Thing

by Susan Colles, Senior Vice President of Global Product & Channel Solutions, Bank of America Merril Lynch

If you’re looking for an example of fast-track technology progress, you’re in the right place; payments technology is currently buzzing. Here’s a business segment that has changed almost beyond recognition in the past five years, with rapid adoption of ISO 20022 just one example of this. But amidst all the technology it’s easy to lose sight of the equally vital human expertise that is essential to keeping payments flowing. This article  examines the interaction between rapidly advancing payments technology and the people who turn these into business benefits.  

Today, spotting top technology trends in the payment industry isn’t what one would call a tough call. ISO 20022 leaps off the pages of most industry journals, but so do other related themes. First, there’s file flexibility; once the exception rather than the norm in the banking industry, it has now become a corporate expectation and clients now assume banks will accommodate them on this front. Second, the natural corollary is that banks need to be experts in translating file formats, with multilingual interpretation as a common client requirement.

ISO 20022

ISO 20022 has become something of a poster-child for the payments industry and it isn’t hard to see why. Today it is rare for banks to receive a payments-related RFP that does not include at least some questions about XML in general and the ISO standard in particular. This awareness of the standard is also starting to percolate to smaller organisations. While the majority of ISO 20022 implementations to date relate to major multinational corporate players, we are now seeing middle market organisations (and even some smaller businesses) starting to pick up on it.

This is partly due to companies’ greater exposure to the standard because many of their existing business applications are capable of processing XML files and messages. A further advantage is that the standard is user-friendly, in that it explicitly identifies individual data fields with the relevant tags, in contrast to more cryptic standards such as EDI, where the user has to know the location of the data within a file in order to know what it represents.

One of the factors that obviously has a major effect on the adoption of ISO 20022 is the degree to which ERP, treasury management and other system vendors support it.

Right process, right client

To date, adoption of ISO 20022 has been most prevalent amongst larger, multi-banked entities. With most treasurers having to work with small technology budgets the standard represents a great cost/efficiency opportunity. Clients adopting this model will essentially use a single interface that can accommodate multiple banking partners, countries and payment types. Though implementations of this aren’t trivial and still require careful preliminary planning and often middleware, any internal payment formats requiring translation will typically be fairly well-known. 

The situation is very different at the other end of the size spectrum, where many smaller corporations simply do not have the IT resources to coax their existing technology into outputting ISO 20022 messages. Furthermore, the payment formats generated by this type of technology will often be relatively obscure and/or proprietary. These companies therefore look to their banks to do the heavy lifting by taking the file format generated by their internal technology and translating/processing it on their behalf. 

That’s quite a responsibility to assume; it requires that bank technology must not only be flexible, but also that bank personnel must be highly expert in translating formats - some of which they may have never encountered before. Furthermore, the client will also be expecting to obtain treasury and reconciliation information back from the bank in a format that they can readily upload to their accounts receivable system for reconciliation or perform treasury cash balance functions. 

There’s been a hot geographic trend of late, with demand for this sort of service in Asia-Pacific both strong and growing. This may be attributable to the region’s relatively resilient performance in the downturn, or possibly because few corporations there do not have (or cannot justify) the technology resources to translate their existing payment message formats in-house.

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