Published: September 19, 2011
To some people, CGI is yet another acronym in the financial sector. But to those who are already more closely involved, the Common Global Implementation group promises to take message harmonisation in the cash management sector to a new level.
The CGI was formed in October 2009, with SWIFT once again playing host for the inaugural meeting of an inclusive collaborative group of key stakeholders - banks, vendors, corporates and national payment associations - that would re-define the competitive boundaries within the cash management space. This is not just another article about ISO 20022 XML messaging – it’s about a significant changing mindset in the cash management world.
Message standardisation would become a vital factor in the new world.
The CGI was a logical evolution of the earlier CSTP (Corporate Straight-through Processing) Bank Group, the original key stakeholder collaborative effort which was formed in June 2003 on the back of the RosettaNet and TWIST initiatives. While the CSTP was a success in terms of establishing greater collaboration, it lacked the formal governance model that would underpin its ongoing growth. It is also important to acknowledge other independent initiatives on the market at this time that also had a focus on standards and ideally, a more consistent method of interpretation and adoption. This included the CRG (Corporate Reference Group), UN/CEFACT TBG5 forum and, of course, the SWIFT SCORE (Standardised CORporate Environment) initiative. However, with the birth of CGI came a new dawn, as participants from these previously independent groups joined forces to make a more globally diverse and inclusive CGI forum. The CGI has the added benefit of formal terms and conditions, which include the election of co-convenors who represent the financial and corporate community. With SWIFT providing the secretariat, it has a very firm foundation and now enjoys a membership of 41 institutions and associations globally, with interest continuing to grow across all stakeholder groups.
An important driver behind the formation of this key collaborative group was an underlying acknowledgement that while the cash management business had a new set of financial messages in ISO 20022 XML, it was evident that banks had developed their own interpretation of this standard. While these interpretations were consistent with the messaging standard, it was crystal clear that this approach still created challenges for the corporate community that wanted, if not demanded, message harmonisation. From their perspective, the competitive boundaries needed to move – it was no longer acceptable for banks to look to compete around the connectivity, security and messaging/file formats, which in their eyes, was clearly an integral part of the collaborative space.
This mindset change in the corporate sector effectively resulted in a significant shift in the competitive boundaries, with banks increasingly forced to focus on price, coverage, capability, service and, most importantly, value-added solutions that would take their cash management propositions from the standard STP (straight-through processing) to the all-embracing STR (straight-through reconciliation). Message standardisation would become a vital factor in the new world.
It was clear that the banks needed to step up the level of collaboration and the April 2009 ISO Standards Maintenance release provided the ideal opportunity to demonstrate that commitment. This release provided a functionally richer set of financial messages that included a number of key improvements over the October 2006 release: for example, clearer payment method identification and agent definition, combined with improved regulatory reporting and tax structures that now addressed the requirements in both the Philippines and Thailand. This new messaging set would provide the opportunity to define a series of core ‘harmonised’ messaging templates that would, in theory, enable the corporate community to have a more seamless multi-banking ISO XML messaging implementation.
Following the inaugural CGI meeting, three separate work streams were created that focused on developing core implementation templates that covered:
From a payments and collections perspective, the core objective was to establish a level of alignment that would address both the core message and the associated local in-country rules. The discussions focused on understanding and validating what the specific data requirements were in a list of phase 1 (core) countries. The individual requirements of the payment methods in each country were discussed in detail and agreement reached on which field (XML tag) should be used to support any ‘local’ specific information. This level of discussion was required in order to achieve the required data ‘harmonisation’, which effectively built on the original mandate of supporting data overpopulation – a concept that allows a customer to reduce/remove the level of bank specific data filtering as the business rules now reside at the banking side. [[[PAGE]]]
The payments and collections group also considered what level of harmonisation was physically possible with the associated payment status report (file and payment acknowledgement), bearing in mind the differences between each bank’s back-office systems. These discussions allowed the introduction of a new common error code list which will enable corporate customers to develop a bank-agnostic master error code schedule, thereby removing one of the complexities associated with a multi-banking implementation. This effectively meant that any CGI compliant bank would provide the same core status reason code for the same error condition – a significant step towards adopting a standardised operational exception handling process.
The CGI has now published the implementation guidelines for both the payments and reporting work streams.
Finally, the reporting work stream focused on defining the content and core fields that would be supported as part of a generic template. Clearly while the ISO XML bank statement is functionally rich, the underlying content will be driven by the capabilities of your selected banking partner(s). Nevertheless, this is a positive and significant step forward in terms of achieving a more harmonised implementation of the messaging standard.
In terms of the current status, the CGI has now published the implementation guidelines for both the payments and reporting work streams, with the collections guidelines expected shortly. Given the significant investment in time to produce these guidelines, combined with the increasing demand for ISO XML messaging within the corporate community, it is probably no surprise that these guidelines are now being recognised as a blueprint for ERP and TMS vendors. They have a golden opportunity to develop standardised out-of-the-box applications and product extensions that can greatly simplify and accelerate the implementation effort for corporates and banks alike. SAP and SunGard are already reviewing these guidelines and others are expected to follow.
The work of the CGI now provides a clear opportunity for corporates to adopt ISO XML financial messaging in a more standardised and harmonised way. People have been aware of the potential benefits of ISO XML messaging, which can improve existing technical and operational processes and establish a low cost, low maintenance strategic cash management environment.
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