Switzerland has a unique status in a number of ways and often makes clever use of its position, for example when it comes to the Swiss Financial Center. When SEPA was introduced in the European Economic Area, SIX – an organization made up of 140 Swiss banks of various sizes and with different focuses – decided to wait before taking the step of standardizing and harmonizing their own payments setup. It was then decided in 2016 to move forward with modernizing and simplifying existing payments processes (currently involving various formats, procedures and document types) and to make them more economical by 2020. A timeline for companies, banks and software providers was defined – but what has happened since this announcement? How far has the standardization progressed? And what unexpected challenges have people been faced with? Treasury Matters talks to Karsten Kiefer, Product Manager and Payments Specialist at BELLIN, to find out.
TM: What is the timeline for the migration of Swiss payments?
KK: The plan is to implement the migration step by step, starting with wire transfers that are scheduled to be standardized by mid-2018 based on the global ISO 20022 XML format. In a number of financial institutions, changing the format is set to go hand in hand with changing the communication channel between customers and the bank. Migrating payments isn’t necessarily connected to standardizing communication channels, though the latter also makes great sense. Nevertheless, a number of financial institutions are planning to introduce EBICS at the same time to help promote ISO20022 standards. In some cases, an EBICS connection is actually a prerequisite for being able to submit the new bank transfer formats. Despite the clearly defined timeline up until 2020, we’ve been witnessing a very dynamic process. One of the four main players in the Swiss payments landscape, Postfinance, has announced the discontinuation of the previously used EZAG messages by the end of 2017. This means that anyone who has this bank in their portfolio has to get started on their migration project ASAP, as the bank is threatening to fully implement these changes for direct debits and notifications/account statements as well as for wire transfers as early as December 31, 2017!
TM: BELLIN works with a number of Swiss companies. How do you approach this process?
KK: We notified our customers very early in the process that this project is coming their way and provided the treasury departments with comprehensive information, especially as – depending on how many banks a company works with and what business volume we’re looking at – this can amount to quite a substantial project. Our customers need to make sure they factor in sufficient capacities and review their bank portfolios. Unlike when SEPA was introduced, however, the terms of the migration are not legally binding in Switzerland. This has led to financial institutions implementing the changes at different paces, so companies are still waiting on all banks to complete their projects.
TM: Which banks have completed the migration process?
KK: Historically, being extremely independent has been very important to Swiss banks, starting with payment formats. There are Postfinance formats as well as formats for all other financial institutions. The way in which corporate clients communicate with their banks is also unique to virtually every bank – whether internationally active or regional. They all have their own proprietary communication standards. The good news is that the four biggest banks – Credit Suisse, Postfinance, UBS and Zurich Cantonal Bank – have completed the migration process. We’re in close contact with many other institutions, either directly or via our customers. We’re maintaining a list that details where each small and regional banks stands in the process. This allows us to give our customers the best possible advice, for example on which banks in their portfolio to tackle first.
TM: What challenges are companies facing along the way?
KK: Projects are well underway for many of our customers. That said, with banks implementing changes at different paces, companies are unable to do everything at once. For many of them, this results in an IT project on top of the format standardization project, as their ERP system temporarily needs to support two formats at the same time. This is all feasible – but becomes much easier when the companies know exactly what they’re dealing with and what they need to plan with. Depending on the number of banks in their portfolio, this can easily turn into a bit of a “migration marathon” for companies. And let’s not forget: standardizing wire transfers is only the first step, to be followed by account statements, direct debits, payment slips and the general introduction of IBAN. One thing is for sure: Swiss companies will not get bored next year, and neither will we.
TM: So how can companies prepare for this “migration marathon?”
KK: We are in close contact with our customers and our advice is to get started ASAP and to free up the necessary capacities. Experience shows that towards the end of a process like this you’re likely to be dealing with resources stretched to their limits and mounting stress levels. We can also help companies who would like to introduce EBICS as their standard communication channel in implementing this industry standard. Likewise, we can provide support with the continued use of existing, proprietary communication methods and contracts. We have great experience with projects like this and are able to make a very precise estimate of the efforts involved for each customer. We can plan the project together and implement it within a suitable timeframe. This allows companies to make optimum use of their resources. So no need to fret over the changes.
Read more from our payments specialist, Karsten Kiefer: