The CAMT053 bank statement standard: a user’s guide

Adoption of ISO20022 eXtensible markup language (XML) payments is often studied and written about and the single euro payments area (SEPA) implementations within Europe ensured widespread adoption of this payment standard. Many companies enjoy a level of traceability and transparency previously unavailable. Many raced to meet the SEPA deadlines and for most, the XML story ended after their payment implementation.

But the XML standards story does not end at payment files. Are you familiar with the CAMT053 XML bank statement standard? CAMT053 bank statements can replace formats such as BAI2 or MT940.

Treasury departments should consider this new standard as part of their technology strategy. Standardisation will bring new opportunities to analyse payments and identify opportunities for improvement. But an online search for CAMT053 information will yield limited results. Most published information is bank implementation guides and a limited number of case studies. How do you make the leap from the standard to an actual implementation? What should you know to prepare for a successful implementation with your banking partners?

1. Understand what standards can and cannot accomplish.

Standards do not imply ubiquity or perfect consistency among all partners for all transaction types for all data. The standard is simply that – a standard. It uses a schema, which enforces a certain number of rules within the structure for the tags used, types of values allowed, etc. Standards will reduce variability.

The elegance of this standard is its extensibility; it supports the inherent variability of transactions across the world. Usage of a standard cannot correct problems in the transaction flow fix data that was never passed as part of payments.

How do the identifiers work? There are three identifiers on the transaction itself as shown in Figure 1 below. For the sake of illustration, let’s describe an outgoing SEPA payment.

Figure 1: Transaction

CAMT 053 XML fig1

First, there is a Domain code. This is the highest level identifier for the type of transaction. An initiated SEPA transfer would fall under the Payments domain (PMNT)

Within a particular domain, there is a Code and a further SubFamilyCode. The code will provide an additional level of detail identifying the type of payment. Example: Issued Credit transfer (ICDT).

Finally, the SubFamilyCode provides the lowest definition level for payment. Example: SEPA Transfer (ESCT).

2. How will your TMS or ERP system process CAMT053 statements?

A natural lag occurs between the release of a standard and its initial adoption by customers. This is normal for two reasons: banks must build systems or processes to generate the new file standards, and TMS or ERP providers must provide the functionality to process the statements. From a technical perspective, ERP or TMS providers could build their processes before representative files are available. However, this is difficult to justify due to limited customer demand and risk of required changes. In an environment where software providers must develop functionality to support regulatory and accounting changes, providers need compelling reasons to develop and expand processing functionality. Development activities and implementation of standards by the financial service providers provide software manufacturers with leading indicators on potential adoption. For those providers that have already supported the functionality, customers must understand how the functionality works in their system. Understand it will take a little extra time for your testing processes due to the learning curve for the new standard. Allow enough time to work with your partners to address questions on these layouts.

As a practical example, XML payment implementations can be used to provide an End to End ID number on outgoing payments. The identifier can allow for higher automatic clearing rates as the information can be brought back into your system to perform automatic clearing. In order to take advantage of this functionality, you must consider having payments settle individually, as opposed to batch settlement. This level of information makes reconciliation faster and easier.

3. Analyse for differences inherent to the variability of local clearing systems.

SEPA makes significant strides toward standardization of transaction identification. Any strategy to implement CAMT053 statements must include consideration for the differences between SEPA and non-SEPA countries. Not only will you find differences that identify domestic transfers versus SEPA payments, also consider the implications of returned payments.

Within SEPA countries, there are specific encoding identifying these payments. Other domestic clearing systems may or may not have consistent identifiers for returned payments. In these cases, returned funds may actually appear as a receipt or incoming funds transfer. Make sure you understand how variability may influence the supporting reconciliation processes for your company.

4. Understand transformation of data and inherent variability occurring due to your banking structure.

Most organisations will have relationships with several banks. Understanding the information flow within and across your banking relationships will simplify your implementation of a new standard.

Legacy systems will exist for your banking partners. Enhancing or replacing these systems requires significant investment. Each partner will have different underlying systems. Understand how your banking partner(s) actually create the XML statements. For example, are the legacy systems generating an MT940 that is mapped into an XML statement or is it natively generated? In the case of mapped XML from an MT940, your XML layout will likely experience limitations due to underlying information.

Alternatively, information that passes between systems in its native XML format may contain information in more consistent tags on the XML file. Partner bank arrangements or forwarding agreements represent additional complexity. Many companies have regional banking partners, but may rely on additional partners where there is not a presence in a country. These arrangements can simplify the complexity for payments design, but also must consider the implications on bank reconciliation design. There are a variety of different technical structures to facilitate and support transaction flow.

What’s the most important takeaway? Involve your banking partner early in the conversation about CAMT053 bank statements. This will provide you with enough time to understand what is possible for your CAMT053 implementation. Ask detailed question of your partners to ensure you have adequate information to plan a successful implementation!

Other articles by Amber Christian

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