My ‘out-of-band’ remittance experience
Matthew Dragiff’s blog, The Remittance Data Transport Conundrum for Banks, on Finextra was great and prompted me to record some more thoughts on remittance data from a corporate perspective – Matthew’s Blog
He raises some great points about what happens to remittance data when it enters the bank payment system in a standard message type, one capable of holding the extended remittance information generated by the corporates accounting system.
If the bank has adopted such a remittance based payment standard then ‘in-band’ transmission should be possible – i.e. it should be possible for the bank to pass the extended remittance information in its entirety to the payee electronically. If the bank hasn’t adopted the standard then the extra information will often be detached and either lost completely or re-united later in some form for delivery to the payee (the ‘out-of-band’experience).
Of course, a critical mass of banks would need to adopt a standard message type to make it really work for the corporates – it’s no use me sending my information packed message only for the information to be detached and lost by a bank that hasn’t adopted the standard. The Finvoice standard / initiative is interesting and seems to have gone some way to this in a limited regional area but what we need is a global standard that is fully adopted.
Therefore, I fully support any bank payment initiatives that allow remittance data to be automatically included in the payment and for that data to find its way unaltered to the payee, especially for bulk aggregated payments. We’d all like to see the end of ‘unallocated receipts’.
A change of attitude required from corporates
For me, ‘in-band’ transmission wins every time because I’ve had and seen too many ‘out-of-band’ experiences.
Our business insight on this is that not only do the banks need to adopt an ‘in-band’ remittance capable payment standard but the corporates need to change their attitude as well.
In our work with banks and corporates seeking to straight through process bank credits to their back office we come across issues with bulk payments all the time. The problem is that the bulk payment arrives electronically but no remittance data is attached –this creates the ‘missing remittance’ issue and a reconciliation nightmare that technology can’t really help with.
In our experience, there can be several dynamics at play here:
Banks
- The bank receives rich data and passes it on, but it’s really not that rich
- The bank receives rich data, but is unable to pass on any of the richness
- The bank is unable to receive rich data at all
Corporates
- The corporate is unable to include sufficient data richness in the payment message
- The corporate is unwilling to include rich data in the payment message
Never underestimate just how much of the problem arises from the last ‘unwilling’ point. Your customer has the extended remittance information readily to hand and in electronic form, after all it comes straight out of the accounting system when the payment is initiated. But, your customer is unwilling to always share it with you. No matter how hard you try, you cannot get a list of the invoices making up the bulk payment.
If you are someone like a property agent or pension administrator then you are receiving large bulk payments all the time and have a contractual (sometimes legal) duty to pass on those payments to a third party in good time. But if you don’t know exactly who the payments relate to and are unable to get your customer to tell you then you have a real business process problem, not a banking problem.
Therefore, a global adoption of remittance standards tomorrow is a start but won’t solve everyone’s problems. First, we need to change the attitude of some customers – who just don’t want to tell you what they are paying no matter what mechanism you provide them with.
So the ‘missing remittance’ problem won’t be solved by the banks alone, nor should it be. Corporates also need see the benefit of sharing information between them, initially outside of the banking system, before we can realise the true benefits of straight through processing within the banking system.
