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Digitization as an innovation boost in automation
The current European and worldwide interest rate policy and the general economic situation make it more and more difficult for banks to break even. In addition, there are new regulatory requirements which each institution – now and in future – has to fulfil in order to improve international payments as well as the order processing in security transactions, the business processes (STP) and the reporting. Digitisation makes a major and innovative contribution to the automation of processes
Open Banking and ISO 20022 are driving forces of the change which have found their way in almost all transaction processing workflows and are compulsory in many areas by now. Worldwide, the new regulations of the International Organisation for Standardisation (ISO) are also known as UNIFI, an acronym for “UNIversal Financial Industry message scheme“. With a transitional regulation until 2026, banks are allowed to use MT protocols. However, for payment transactions in foreign currencies, the changeover of SWIFT FIN message types 1xx, 2xx and 9xx to SWIFT XML messages has to be completed at the end of November 2026.
Timeline for the presentation of the introduction of ISO 20022 and Target2 by 2026
Thus, the timeframe for the conversion begins in early November 2021 and finishes at the end of November 2026. Banks are well advised to early convert their processes to the new standards as of 2021. As of 2021, large-value payments in the Target2 system of the European Central Bank are compulsory in ISO 20022 format and valantic recommends to promote the migration with a general digitalisation strategy. Modern software solutions are capable of automating a majority of the processes and hence, providing greater efficiency and application security.
The Belgian asset manager has recognised the need of implementing the new ISO protocols at an early stage in order to avoid later pressure and to be duly prepared for the future. The internationally used ISO 20022 standard supports formats which are considerably more flexible than existing country- and bank-specific message formats and thus provides significant benefits in the field of process handling. For example, extended bank transaction information is provided and improvements for processing complaints are enabled. The use of an end-to-end payment processing also simplifies the interoperability between cross-border payments and domestic real-time payments. Therefore, in January 2019, the headquarters decided to implement a comprehensive software which cannot only perform any SWIFT conversion but in addition provides considerably more functionality for the future.
Typical system environment of valantics X-Gen for ISO 20022, SWIFT and Fix protocol
Country Manager Luxembourg
”Banks that promote the migration and link it with a general digitisation strategy can considerably streamline their processes, make them less prone to errors and thus significantly increase profitability.“
X-Gen is particularly designed for the digitalisation of business processes. Standard applications often represent an isolated part within business process chains and are mostly difficult to integrate in company processes. X-Gen fills this gap by enabling the cross-application configuration of gateways and process logic considering the existing technical and professional environment.
Diagram for converting various message formats for ISO 15022 (MT) & ISO 20022 (MX)
In general, our client had the requirement to simplify the entire SWIFT messages exchange and to create new interfaces for their customers – also customers not being registered at SWIFT Alliance. There was a certain pressure of time regarding the project realisation: In order to sustain the cooperation with certain customers, the implementation had to be realised successfully within only a few weeks. Initially, this included a comprehensive rationalisation of the SWIFT messages exchange.
Project flow for the ISO 20022 implementation, starting with the rationalization of SWIFT traffic, implementation of the conversion, implementation and go-live
The time pressure was significantly intensified due to the need of selecting the correct ISO standards as close in time as possible and creating the specifications for the conversion on time. For the realisation of the ISO 20022 standards and thus the conversion of the MT and MX messages, the bank’s employees have been supported by valantic in a four-day training in order to make the transition and usage as smooth as possible.
The generic workflow and message engine X-Gen allows a quick adaptation and enables automated processes in the banking industry, which means that processes can be automated and adapted to the bank’s requirements in a fast, secure and efficient way. The project start was in July 2019 and in September, the first phase relating to the routing modules and the rationalisation of the SWIFT communication has been realised. Thus, the prerequisites for a uniform messaging had been established.
Within the second phase by the end of the year 2019, the conversion tool has been gone completely productive and since then, takes on the smooth operation of the “translation work”. Checks and interim steps other banking systems have to retrieve are also supported and covered by interfaces.
The automation of the workflows allows a faster processing and at the same time, an extremely high reliability. In total, the entire project, including the planning, realisation, training and productive roll-out, could be completed in record time, namely within six weeks before go-live. The bank also benefits from X-Gen’s adaptability: own dashboards or new workflows can be integrated by the bank’s internal IT department without modifying the source code.