TWIST – the not-for profit group of over 70 financial market participants and service providers which has set itself the target of defining communication standards for commercial and financial payments processes – has launched XML-based standards for commercial payments and working capital management, designed to support corporate-to-corporate straight through processing and reduce the cost of handling commercial transactions.
The standards cover the processing of invoices and invoice dispute management, as well as the automated processing and reconciliation of payments supporting electronic funds transfers, ACH payments, direct debits, cheques and card payments.
The standards published by TWIST incorporate a standard XML core payment kernel for corporate-to-bank payment initiation and status messages. This kernel was the result of extensive collaboration between four standard bodies (IFX, OAGi, SWIFT and TWIST) with the support of nine major international banks. This effort, which was called the “International Standards Team for Harmonisation” (IST), delivered in early June 2004 a core payment kernel which consists of an agreed set of key financial data components required for a payment message in any currency.
The nine banks were; ABN AMRO, Bank of America, Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, Nordea, Standard Chartered and Wells Fargo.
TWIST has developed extensions to this kernel to support the requirements of end-to-end trade processing across corporates and banks and payment systems. The payment kernel plus the TWIST extensions for direct debits, automated bank reconciliation, invoice processing and dispute management can be processed by any bank irrespective of location and can be issued by any corporation irrespective of business line or size.
Steven Hartjes, partner of Ernst & Young, who co-ordinates the payment standards initiative within TWIST, explains: “With the new standards, TWIST is seeking to improve the end-to-end process of handling invoicing, payments and working capital management in domestic and international trade. These standards unlock significant efficiency gains for corporates and their banks. By harmonising the core payment kernel of these standards with SWIFT, IFX and OAGi, we have ensured not just their universal applicability but also the broad support for these XML standards in the banking community.”
Eric Sepkes of Citigroup adds that “the banks have succeeded in reducing the diseconomies between banks of using ‘old’ technologies like faxes, multiple standards, manual hand-offs and double-keying, largely via the use of SWIFT standards. TWIST aims to do the same for corporates.”
Tom Buschman, Treasury Development Manager of Shell and co-ordinator of the TWIST initiative, says: “Several organisations have already started with the implementation of the harmonised payment standards. To further encourage take-up of the new standards, TWIST is establishing various supporting activities, including research, implementation support, training and education.”
A number of organisations have committed to funding TWIST, via sponsorship arrangements, to sustain supporting activities. TWIST expects to announce more sponsors in the near future.
The harmonisation effort with SWIFT, IFX and OAGi was part of a deliberate decision by TWIST to pursue an open collaborative approach. Involving companies and individuals from the world of banking, corporates, consulting and IT vendors as well as the major standard organisations is essential to devise a common solution of standards which are specifically designed to foster process innovations.
TWIST intends to use this groundwork and its expertise in wholesale markets (especially FX & MM) to inform the development of a full suite of standards for all of the core corporate treasury activities.