Tackling remittance challenges: Highlights from the remittance coalition workshops

Contributor: Matthew Dragiff

The Remittance Coalition held its second workshop, just prior to the start of the Association of Financial Professionals (AFP) annual conference in Boston. The workshops are designed to better understand the barriers to the automated reconciliation of payment transactions with remittance data. The participants included representatives from financial institutions, software vendors, corporate treasury practitioners, payment services providers and standards developers as well as standards groups including X9, X12, Federal Reserve, SWIFT, OAGi, IFX, GS/1, NACHA and ISO. During this meeting it was emphasized that the Remittance Coalition is not a new standards body. The Coalition consists of parties (including existing standards groups) who are interested in understanding and addressing remittance problems. Key to this is ongoing input from corporate end users to understand their problems and develop effective solutions.

In June of 2011, the ASC X9 and Federal Reserve Bank of Minneapolis hosted the first Remittance Workshop. It was agreed by all that there is a need for more standardized processes to originate and deliver payment and electronic remittance information to all sizes of businesses to better enable straight through processing and accelerate electronic payment adoption.  The candid comments during the first workshop offered by a panel of corporate practitioners were illuminating and I thought I’d pass along:

• There are too many standards – a single remittance standard would be optimal
• Flexibility and interoperability are needed, yet exception processing is costly
• The needs of small businesses and smaller financial institutions are not well met
• Not all banks can or will forward remittance data in an ACH payment
• EDI is problematic for both corporates and banks, however XML is used by even small vendors and companies
• Software vendors must do a better job of supporting remittance standards
• Whether remittance travels in-band or out-of-band, it’s the financial institution’s job to combine the payment and remittance information prior to delivering to the customer
• Only the very largest companies have the influence to mandate that their customers and suppliers use electronic paymentsand electronic remittance information

It was also recognized during the first workshop that matching receivables data and posting that data to A/R platforms is a complex process that is not easily solved. Limited IT resources within corporations restrict the ability to focus on addressing payments and remittance processing problems while competing priorities at corporations make it difficult to make the business case necessary to gain management support for investing in remittance related solutions. Additionally, both A/P and A/R organizations have limited resources available to sustain electronic adoption strategies and execute the initiatives to promote trading partner adoption.

During the second workshop it was decided that in the near term the coalition will focus on the development of a Glossary of Terms, a catalog of industry initiatives and an inventory of current standards. The group will also provide some coordination between the evolving NACHA B2B Directory initiative, SWIFT, X9 Corporate Standards and the ISO 20022 Standalone Remittance Standard.

The Remittance Coalition will reconvene over a conference call in January 2012 and the next workshop will take place in the first half of 2012. As always, I am interested in your thoughts and comments.

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