Looking for Standards to Centralise Local Payments in Mexico
For a country to offer a viable solution for local electronic payments, two minimum issues must be covered. The first one is to have secure and relievable automated clearing houses (ACHs) for interbank payments and the second is for banks to process their own electronic payments in the same manner and connected to the different clearing services.
Today’s ACHs in Mexico have evolved to offer first class clearing services to the financial institutions in the country and banks can act as payment processors in an efficient way to process same-bank and interbank payments through these switches. With these two basic facts covered, there are other relevant issues pending to facilitate the treasurer’s administration. These are standardization and payment related information. Let’s start by describing the basic facts of the main ACHs available in the country.
SPEUA (Sistema de Pago Electrónico de Uso Ampliado) is the name of the first real-time clearing service, created in 1995 and operated by the Central Bank (Banco de Mexico) designed to process real-time high value payments among financial institutions in the country. Due to infrastructure limitations and the liquidity risk involved, only payments over 50,000 pesos are allowed in this system.
In 1998 CECOBAN, the second ACH for electronic payments in Mexico, started growing significantly on the volume of transactions processed. This service is intended to process low value, high volume payments and is property of the participating banks. The main difference with SPEUA is that all payments can be programmed and must be sent to the beneficiary bank at least one working day before settlement, forcing banks to debit the payor’s account one day before funds are available at the beneficiary account. In 2004 CECOBAN mandated that all payments running through their system should include the CLABE (CLAve Bancaria Estandar) instead of the regular eleven digits beneficiary account used for interbank payments.
This new CLABE account aims to be a national standard for account numbers to facilitate interbank transactions and is formed by the bank code, a geographical code, the eleven digits account number and a verifying digit.
In order to increase security and allow more flexibility and efficiency, the central bank has proposed some relevant changes to the SPEUA service, creating a new switch called SPEI (Sistema de Pago Electrónico Interbancario). The main objectives are as follow:
Banks in Mexico use proprietary file formats to process their customers’ payments. This circumstance is similar in other countries in the region and has forced treasurers to invest in different software interfaces among their ERPs or proprietary AP systems to communicate with each of the bank’s applications used by the company. The lack of standards can be frustrating for the treasurer and the IT members of the company, causing a forced loyalty and high cost, time consuming efforts related to bank operations. Though some banks offer EDI standards to receive payment instructions these formats may have significant differences from bank to bank and will end up being a local solution with a specific bank in the country.
One of the best alternatives available today to standardize payments is Swift. Some multi-national corporates have adopted this solution, creating Ma-Cugs with their main banks consolidating their payments worldwide with the same standards through MT 101 messages and one of the main differences with EDI standards is that almost every bank is familiar with these standards and can easily understand and process the messages.
Today MT 101s are used by some Mexican banks to process same-bank and interbank payments through the different clearing services in the country. Fin messages can accommodate the required fields and information needed to be compliant with banks, ACHs and information needed for reconciliation and control by the corporate and the beneficiary.
Much has been written about the high costs associated with a Ma-Cug in terms of infrastructure and expenses, but it is important to clarify that Ma-Cugs begin to show their real benefits only if the corporate strategy is focused on a worldwide solution and the company has the need to standardize their treasury processes in different countries. The possibility of communicating with almost any bank in the world using the same infrastructure and standard messages substituting all electronic banking services worldwide and the fees associated with them, generally will pay off the investment needed to connect to SWIFT.
Some of the benefits obtained by the use of this solution are:
Swift has associated with different business partners around the world to offer Swift connections at reasonable prices, thus being a good solution for those corporates that don’t want to invest in the Swift infrastructure. Under the name of Service Bureaus, companies authorized and certified by Swift offer assistance and connection to Swift, this being a cheaper solution and a good alternative for corporates. To ensure this, solution providers are capable of offering operational capabilities, service quality and SwiftNet specific services, a compliant Business partner – Service Bureau must be reassessed on an annual basis to be re-certified. This way Swift can guarantee the highest level of service quality to its customers.
It is expected that in the near future large multi-national corporates in an effort to achieve standardization and centralization of payments and information, will turn to Swift and banks will be forced to invest in the required infrastructure to offer them a non expensive solution for their Swift connection.