MT, IAT and 20022

Recently Tower Group published research report on Payments developments, emphasizing the traction towards global payments standards (see Payments Rail). Now that IAT (International ACH transactions) are in production with mandatory extended information on counterparties and payment stacks, at every hop of payment information, standards interchange is required to map SWIFT international payment information in MT format to NACHA compliant IAT formats.

Message Type Translation will be a minimum requirement at Overseas Gateway Operator (OGO). After MT to IAT translation at OGO, once payment record with addenda lands up in Depository Financial Institutions, translation of IAT addenda to internal formats (local repository formats) to be done. If banks aim to reduce translation at various stages with ancillary cost optimization and efficiency in terms of technology, people, process and operations, there is always a strong case to converge to most commonly used and future oriented xml based ISO 20022 standards framework.

In the cited case, with the proposed MT to Mx migration, OGO translation will be drastically reduced though not by-passed completely. With the growing information needs of business and the competition trajectory on common standards, it is not quite far-off target for US ACH to converge to ISO standards. Fed has already published message mapping rules to convert FedWire CTR & CHIPS message to pacs.008 (Customer Transfer ) message under ISO20022 set.

So, if future is obvious on standards, earlier adoption will keep institutions and all relevant players in good stead.

However, 20022 adoption should consider localization of essential usage rules, relevant to market. For instance, IBAN may not be relevant in non-IBAN countries and payments entering to Euro zone from external countries should implement additional mapping / derivation rules for IBAN. Such geo-specific definition of tag usage is required, though the endeavor should be to minimize such variants.

So writing on wall is wide and vivid, no more translations at payment hops. 

Extended Payment information beyond the fundamental five (Ordering Institution, Ordering customer, Beneficiary, Beneficiary bank, Amount & Date) should flow seamlessly across geographies and networks and schemes to the ultimate beneficiary with no data truncation or loss. Banks can then acts as information carriers more than as payment carriers.

Obviously, information carry more value than payments in any market or competition.