The move to streamline online payments continues with the Fed and operators of the Clearing House Payments company deciding they’ll expand wire transfer formats.

The Federal Reserve Banks and The Clearing House Payments Company — operators of Fedwire and CHIPS — announced May 13 that they’ll expand their wire transfer formats to include standardized remittance information for business-to-business payments.

AFP has been urging the wire transfer operators to include remittance information with wire transfers so payments can be applied efficiently to the correct accounts and processed straight through to corporate accounts receivable systems.

The new message format provides companies with remittance detail to apply payments for 25-30 invoices in a single wire transfer. The data could be translated into a variety of popular formats, including the EDI STP 820, the global XML ISO 20022 and some proprietary or human readable formats.

When will it happen? The enhanced message format is set to be available by the fourth quarter of 2010. It will be implemented in conjunction with a global expansion of the wire transfer payment message needed to comply with demands by regulators for greater transparency in international transactions.

The expanded format will have sufficient capacity to include originator and beneficiary information for correspondent banking transactions called “cover payments” or structured business remittance information.

In meetings that AFP’s Payments Advisory Group (PAG) has held with the Fed and The Clearing House since 2004 and through AFP’s own survey research, the Association demonstrated the waste in time and expense to organizations caused by wire transfer payments that require further research and must be applied manually to accounts receivable systems because they don’t have sufficient information in a standard format.

The Payments Advisory Group (PAG) worked with the wire transfer operators to identify a standard format for the data and to demonstrate to financial institutions and software vendors that companies need and would use this information.

While some banks supported the initiative, others were reluctant to move ahead without further evidence of demand for remittance information by corporate users of wire transfer systems.

Last summer, AFP reached out to its corporate treasury and finance members to enlist their companies’ support. Over 90 organizations signed on to a Statement of Support for the wire transfer initiative, affirming that if standard remittance information were offered in wire transfers, they would use the service to the extent feasible.

Tags: accounts receivable, format, message, standardized, wire transfers