How CBPR+ and ISO 20022 is Changing Customer Reporting

The impact of Cross-Border Payments and Reporting-Plus (CBPR+) on customer reporting comes under the spotlight.

As the payments industry has already embarked on the journey of adopting ISO 20022 messaging (MX) for international transactions, payment instructions will become richer and STP will increase with enhanced data. For now, customer reporting has not changed significantly, as most of the banks have not yet migrated to new message formats for reporting. Even though some banks are already providing an older version of MX reporting to corporates, that is mainly a like for like version of MT reporting.

Since the start of MX messages for cross border payments in March 2023, 15% of traffic has already been shifted to the new format, with a daily average of 635,000+ payment MX messages transmitted over the SWIFT network, and the adoption is growing day by day.

Once enhanced data flows within payment instructions, and banks adopt the new reporting formats, it will be interesting to witness the market’s response to enhanced customer reporting, which should eventually benefit both financial institutions (FIs) and corporates. At present, corporates are not obliged to move to MX, but they will start seeing the impacts, such as data loss and data truncation on existing reporting, soon.

Legacy challenges

Some might argue that this change is regulatory driven, but adopting a richer format has long since been a business need. One of the major challenges that FIs and corporates are currently facing relates to different messaging formats in various market infrastructures.

SEPA and other internal payment infrastructure of countries/regions has been operational in the MX format for quite some time now. Limited data availability in conventional MT payments and reporting were reducing the scope of STP and effectiveness of processing these payments for both banks and corporates.

Automatic reconciliation of thousands of transactions on a daily basis was becoming increasingly harder with limited and unstructured data sets available in rigid MT format. Due to a lack of structured data, banks and businesses are compelled to rely on manual checks and  fixes, even though most of them were investing heavily in automation via digitalisation.

The lack of opportunity for harmonious interpretation and the unstreamlined use of MT message tags by different banks and countries contributed to an increase in the problem. Although international banks tried to reduce that gap for businesses by harmonising their reporting via internal entities in different countries/market infrastructure, it could not be accomplished by banks due to a lack of structured data, and the existing rigid formats.

“Major corporates have struggled with inconsistency in customer reporting from their bank operating in different geographies/countries.”

Changing future

Will CBPR+ reduce the current challenges and gaps in payment and reconciliations for FIs and corporates? Considering the major chunk of high-value international payments happening currently via MT, moving those payments to a new format will not be an overnight and painless task. It will take some time to migrate everyone onto the new format.

Once the migration is complete, banks will start adopting and utilising the enhanced data provided in the new format – and that’s when the game will start changing. It will be a slow start but will have long lasting benefits and impacts, hence adoption should progress quickly.

This enhanced data will increase the effectiveness of AML checks and reduce the number of fraud and money-laundering transactions, helping to make regulators feel more comfortable in the current challenging global scenarios.

A major benefit would be to have all (or at least the majority of) market infrastructures in the same ISO format, which will bring standardisation into the end-to-end life cycle from payment until account reporting for reconciliation.

For businesses, there will be a chance to capitalise on the full extent of their investment in digitalisation. ISO reporting will bring the structured and key data that businesses need to reconcile their payments automatically without any manual intervention. For example, use of the unique end-to-end transaction reference (UETR) will simplify the process by tracking a transaction at any stage anywhere in a unified manner.

We understand that the journey towards achieving the goal is not straightforward, but once we reach the destination, the benefits will be significant for every business in the payments industry. With respect to MX, corporates should consider talking to their banks and software service providers to seek what is on offer for them already or coming in the near future.

“Despite the fact that CBPR+ is a regulatory change, it offers plenty of long-term value for every business in the payment life cycle.”