Magazine article American Banker

Viewpoint: STP 820's the Best Format forB2B Wire Transfer

Magazine article American Banker

Viewpoint: STP 820's the Best Format forB2B Wire Transfer

Article excerpt

Over 15 months ago the Federal Reserve Bank of New York and The Clearing House Payments Co. LLC released the results of their research on wire transfer business-to-business payments. Their study, "Business to Business Payments: Customer Preferences and the Opportunities for Financial Institutions," clearly indicated that automation and payment information capability (invoice data) for business payments was needed on the Fedwire and Chips payments systems.

In the first half of 2007, the New York Fed and The Clearing House took a leadership position. Their goal was to get the industry to coalesce around the need for enhancing this critical payments infrastructure.

At first, both organizations believed that the main hurdle to overcome was deciding what technical format to use for the invoice data. The debate centered on the simplified American National Standards Institute's Electronic Data Interchange (EDI) X12 STP 820 or the brand-new ISO 20022 format developed in Europe for use in the Single Euro Payments Area.

The STP 820 should be the format of choice, because of a number of compelling benefits.

* Speed to market - large corporations are able to process the STP 820 into their enterprise resource planning packages without any upgrades or changes.

* Cash management software vendors are already implementing the STP 820 for their ACH cash management offerings, adding it for wire transfers, according to several of them, will not be extremely complicated. This will enable the small and midsize business market as well.

* Banks already have EDI delivery platforms that can be used to deliver the STP 820 to their business customers today. Though there is cost initially to bridge this internally at financial institutions, in the long term this will streamline infrastructure and maintenance costs.

* This is the first step in streamlining front-end applications for business customers. …

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