As a follow-up to a recent blog I published on the possible impact of the SWIFT ISO 20022 migration on cross-border payment STP rates, I ran a survey on LinkedIn to gauge opinion on the matter.
The question I asked was whether you think SWIFT Cross Border payment STP rates will increase after the introduction of ISO 20022 in November 2022? Respondents had the choice of 4 answers:
- The increase in STP rates would happen immediately
- The increase in STP rates would occur but in the longer term
- The STP rates would stay the same
- The STP rates would decrease
The good news is that only 11% see the rates going down, meaning that almost 90% expect a service improvement or delivery of the same automated rates we currently support.
I don’t want to be too harsh on the 11% that feel that the rates will deteriorate. After all, nothing in life is guaranteed, but I will say that I think they are outliers, and I’m personally in the group that expects rates to improve. However, I do caveat that understanding with the belief that players in the market will invest in the necessary system changes that will leverage the new standards for the improvements in the service they’re designed to deliver.
Without such investment, there is a distinct risk of failing to achieve our collective industry goal. This point may be backed up by the 17% of respondents who envisage rates staying the same. One might think that position is a somewhat cynical viewpoint, that all of the pain and the risk of change will leave us exactly where we are. For me, that strengthens the case for intelligent, active investment in solutions that take advantage of the new standards and deliver value to the business.
The majority of respondents see a bright future, with 72% expecting an improvement in STP rates. Hats off to the 18% who are envisioning an immediate improvement in STP rates. I admire and welcome their optimism and faith in our collective ability to get this significant change program right, first time. Remember, you’re only as good as the partner entities and correspondents that you deal with, and unless you have software to address any inadequacies in the payment data you receive, your faith in your sending and receiving counterparts may be somewhat misguided.
What’s more reassuring to me is that the lion’s share of that 72% cohort, in total 54%, do not see an immediate improvement in rates. They think it will happen, but that it will take time.
It’s difficult to argue with the logic of this position. Anything new takes time to settle in. Most institutions are expecting some teething problems. We will all need to learn the best ways of processing the latest standards and how to manage the different flows efficiently. Configurations and processing rules, best practices and operational efficiencies built over the many years of MT-based message flows will need to be adjusted.
Ultimately, every bank will want to show a tangible return on investment for their SWIFT CBPR+ program, and the quicker those returns are achieved, the better.
So, what mitigations and insurance policies are banks putting in place to help them through this period of uncertainty? How will they minimize the period before STP rates start to increase?
As ever, we will see winners and losers in this great STP race, and the question is – Where will your organization finish in the upcoming STP Olympics?