Insight & Analysis

Better the (data) devil you know?

Published: Jan 2022

New data formats promise much, but without compatibility with existing treasury management systems treasurers will struggle to realise the benefits.

Person reviewing digital data

The 2021 GTreasury/Strategic Treasurer technology survey revealed that despite considerable investment in new technology, almost half of corporates were still using older data formats. One third of the companies surveyed said they had no plans to adopt newer, enriched data formats that use XML, preferring to stick with older standards such as MT940 and BAI2.

Given that XML is more easily consumable by automated systems and even human readers, compatibility with existing systems is one possible explanation why corporates continue to favour traditional formats. As XML continues to become the banking standard and a regulatory requirement with ISO20022, one vendor suggested some legacy TMS providers are charging their corporate customers because they are simply not able to ingest these new formats.

“If it is simpler for a bank to send a historical data format using a historical standard – and the technology provider has years of experience accepting that format – treasurers are not going out of their way to request a newer format,” suggests Steve Wiley, Enterprise Strategist Treasury Solutions at FIS.

Additionally, if a corporate already has the older formats in place, the treasury team might struggle to get the cost of implementing newer formats approved.

Another likely factor behind patchy XML adoption is alignment. Although XML-based formats offer superior messaging capabilities, it is highly likely that in a disparate banking landscape a corporate will be working with at least some banks that don’t support this format. On the other hand, all (or at least the vast majority) will offer the MT formats.

“Furthermore, if the treasury department doesn’t know the difference from working with that data within the source system (which is often the case), there will not be a driver for the treasurer to request a format change,” adds Wiley.

CAMT – the ISO20022 format associated with SEPA payments – has been promoted for helping to standardise the reporting of account information and includes specific tags to report specific information. In contrast, BAI2 and MT940 include some rows (such as transaction detail or statement line) that can be populated in a number of different ways.

The new formats deliver key financial messaging data in a cleaner, more consumable way – meaning there is less chance of inaccuracy – and the clean structure enables corporates to easily extract data in more flexible ways to improve financial visibility, positioning and analysis.

Pete Srejovic, CTO at GTreasury, says the industry could (and should) do a lot more to take advantage of the XML standard and adds that it will be interesting to see how much the needle has moved the next time the survey is conducted.

“The largest shortcoming of legacy formats is the formatting itself,” he says. “With all information held in single run-on strings, customers must decipher messy text blobs to understand critical transaction information. CAMT XML offers the ability to separate this information into discrete tags, enabling systems to parse information into separate fields which makes information much clearer to users, expediting processing and routing.”

Until the industry standardises around CAMT XML and all banks perform the transformations needed to leverage CAMT formatting to its fullest, it could be argued that customers using old formats are not yet missing out greatly.

Given that SWIFT is only planning to phase out some of the MT messages for interbank communication, banks can continue to offer MT940 and MT942 bank statements to corporates. However, it would seem prudent for treasury and finance teams taking on new bank integrations to at least consider CAMT in order to future-proof their implementations.

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