X9 and SWIFT release new bank transaction reporting standards.
A new standard to improve corporate cash management was released this week. After working on the standards for nearly two years, X9 and SWIFT announced the release of BTRS (Balance and Transaction Reporting Standard), which will help bring together previous iterations of the standards created by the Bank Administration Institute (BAI).
BTRS will “harmonize the disconnect found in the previous versions of the BAI releases,” according to a statement from X9, the organization that now maintains the standards. X9, which describes itself as an organization “dedicated to developing and maintaining standards for the US financial services industry,” was referring to BAI1, released in 1980, and its replacement, BAI2, created in 1987. BAI 2 has been the bank code standard since that time. And while other reporting formats exist, BAI2 has by far been the most widespread with just about every commercial bank in the US and Canada providing reporting to their clients using these reporting codes and standards.
Harmony. But BAI standards have had their shortcomings, namely they were filled with inconsistencies. This proved a challenge for companies using the standards because there was a lot flexibility and room for interpretation of the codes and formats. Also, banks often would take advantage of the chaos by applying their own preferences and opinions. This resulted in the classic problem of companies having to customize their ERP or treasury management systems for each bank from whom they receive data files.
James Wills, senior business manager, SWIFT, said in the X9 press release that BTRS will smooth out these inconsistencies and create “one common language for corporate treasurers and their banking partners. The end result will be a more efficient process for corporate treasury, thus eliminating errors and reducing risk.”
For its part, BAI will exit the standards business altogether, having sold the copyrights to the BAI reporting codes to X9. Still the BAI2 standard isn’t going away anytime soon. According to David Repking, VP treasury services with J.P. Morgan and John Scully, Sr. VP, Reporting & Receivables with Bank of America BAI2 will still be around for awhile. Their banks, at least, have no intention of driving customers off of BAI2.
Working group. To get BTRS to its current launch took the work of a host of industry participants. This working group included large US banks, corporations such as GE and P&G, as well as SWIFT, governments, standards groups such as ISO, and related other software vendors.
The group had very broad goals for the new standards that go well beyond the scope of BAI2.
- Global. The new standards are intended to be used globally where BAI was very U.S. centric and are therefore written in multiple languages.
- Tighter. Unlike BAI2, the new standard seeks to remove the ambiguity and room for interpretation as well has the multiple options for reporting the same data.
- Interoperable. The new standard is intended to work in tandem with other standards such as SWIFT and ISO.
According to Mr. Repking and Mr. Scully, the group has accomplished a great deal, including:
- Completing the final draft of the standards.
- Cutting the number of reporting codes by half while adding only three new ones.
- Making the standards broader and more granular at the same time as making them tighter (which suggests how unwieldy the BAI2 standards had become).
- Adding codes for SEPA transactions.
- Adding additional currency codes besides USD.
Next Steps. With the final draft complete the standards are now in the approval process. They must be approved first by X9 members, followed by the X9 board and finally ANSI. Following these approvals banks will have to begin developing their systems to support the new format. Once that is done they will begin testing with the bleeding edge companies of the world.
Btw, what’s wrong with SWIFT for Corporates? One might be surprised to see SWIFT supporting the development of a new standard that is replacing a standard it was already working to replace. But SWIFT believes the BTRS will serve as a compliment to their communication channels and that companies will likely need to use both processes. SWIFT’s Mr. Wills affirms that the BTRS provides more granularity and is broader and tighter in its code makeup than what SWIFT could offer. It also wants to be a “team player.”