In 2017, NACHA (formerly the National Automated Clearing House Association) published a case study on how German multinational science and technology company Merck KGaA Darmstadt, Germany was leveraging ISO 20022 XML to execute payments for commercial transactions and generating savings with a combination of payments solutions and processes.
Director and Head of Treasury Technology & Digitalisation, Uwe Reinemer, explains that the company has been using the financial messaging standard since the ECB emphasised the need for payment service providers to prepare customer servicing channels for SEPA transactions – especially those using the ISO 20022 XML format – in 2013.
“The objective was to harmonise performance,” he says. “In terms of camt.053, what interested us was the data we could get – the MT 940 format is limited, especially in the reference field with just 390 characters. If you get paid by your customer once a week or once a month with several invoices, those characters are used up very fast.”
(The camt.053 message is a detailed bank-to-customer statement that provides structured information on all entries booked to a customer’s account for the previous day).
With more information, Merck KGaA hoped to achieve a higher reconciliation rate on its account statement processing in the ERP system. However, Reinemer acknowledges that this objective has not been fully achieved.
“The first thing we had to do was to try and harmonise camt.053 with the banks,” he says. “We work with a number of international banks and many more smaller, local banks and the large banks all had separate camt.053 standards which did not fit the ISO standard, so we had to convince them to at least stick with the latter.”
“Camt.053 also has bank transaction codes that are different for each financial institution,” adds Reinemer. “In addition, for remittance information there are a number of different places within the statement to put this information and again every bank is using it differently.”
The period in which both MT (legacy) and MX (ISO 20022) messages can be used for cross-border payments will end on November 22nd. But this deadline will not directly impact what companies such as Merck KGaA do in local clearing systems.
“We work in 70 countries and if the local clearing system is not capable of supporting XML, we will not gain anything,” says Reinemer. “So there are other factors that would have to be improved in order to realise the full value of ISO 20022.”
“For example, in Singapore we used pain.001 (a message that initiates the customer payment) and enriched it to provide a lot of information to our vendors within the payment. However, the clearing system was not able in the past to transfer it from A to B. So in the end you can have camt.053 on one side and pain.001 on the other side, but if the system in between is not capable of transporting the information you won’t get the benefit.”
More encouragingly, the company has a proof of concept with its ERP system where it took the camt.053 information and converted it into MT 940, extending the remittance information beyond 390 characters.
