Fedwire^® Services

AFP survey affirms strong demand for remittance information

September 2009

In May 2009, the Association for Financial Professionals^® (AFP) conducted a survey on the value to organizations of receiving remittance information with wire transfers and the systems and software they use to send and receive wire transfers. This article contains excerpts from, “Providing Remittance Information with Wire Transfers Report of Survey Results” (PDF) shared by the AFP.

The posting and reconciliation of wire transfer payments remains a manual process for corporations because sufficient remittance information does not travel with the wire transfer message. The AFP (Off-site Link) has been working with the Federal Reserve Banks and The Clearing House (Off-site Link), operators of the Fedwire^® Funds Service and CHIPS^®, to develop a streamlined solution to this problem.

Recognizing the value of remittance information to businesses, the Federal Reserve Banks and The Clearing House agreed to expand their formats to provide remittance information with wire transfers by late 2010. For background see “Looking beyond 2009: Phase 2 for Fedwire format changes.”

The remittance information that will be provided to businesses in the expanded wire transfer format will include:

• Remittance originator (including contact name, phone number and e-mail address)
• Remittance beneficiary
• Primary remittance document Information (invoice number or bill of lading number, etc.)
• Actual amount paid
• Gross amount
• Negotiated discount
• Adjustment information
• Date of remittance document
• Purchase order number
• Dispatch advice number

And, implementation will be a multi-tiered process:

1. Fedwire and CHIPS must transmit remittance information between their systems and the financial institutions.
2. Financial institutions will need to upgrade their software and systems to transmit the data to and from their corporate customers.
3. Treasury workstation, enterprise resource planning (ERP) and accounting software providers will also need to upgrade their systems.

And the survey says …

Over 3,000 AFP corporate practitioner members received the survey; 331 responded. The survey findings will give financial institutions, software providers and wire transfer operators helpful information as they upgrade their systems to include remittance data.

Key findings

Survey results highlight the value to organizations of receiving expanded remittance information with wire transfers. Of the survey’s respondents who varied in revenue size and wire volumes, 96 percent indicated that remittance information would be valuable to their organizations if it were made available in the wire transfer message. This is especially true for larger organizations and those receiving 5,000 or more wire transfers annually.

The majority of organizations expect to use the new message data format to both send and receive wires if it is made available to them by their financial institutions and software service providers. As expected, wire transfer recipients, who stand to benefit most from better straight-through processing (STP) rates, are most likely to use the new message format — 91 percent of respondents said they would use it. It is notable, though, that almost two-thirds of organizations (61 percent) indicated they would send remittance information with their outgoing wires, perhaps in part to reduce the number of inquiries from the receiver of the wire transfer.

In addition to enhancing value to corporations’ existing wire transfer book of business, the survey results also illustrated that including remittance information will have a positive impact on future wire transfer volume. More than one-third of respondents (37 percent) indicated that if remittance information were provided, their organization’s wire transfer volume would increase, or at least would not be eroded by migration to alternative payment methods that permit structured remittance information. The remaining two-thirds of respondents believe that wire transfer remittance information will be neutral to future wire transfer volumes.

A wide variety of systems and software would be involved in conveying remittance information with wire transfers. However, financial institution-provided systems will play a major role. Bank cash management systems are the primary channel used by organizations to send and receive wire transfers. Bank balance reporting and lockbox systems also play an important role in the incoming wire process. Treasury workstations, accounts payable and receivable, and to a lesser extent ERP systems, are additional wire transfer information channels.

Including remittance information with wire transfers would contribute valuable efficiencies to the payment process, expedite the flow of information between trading partners and add data certainty to complement the same-day certainty of funds.

Complete results and resources

More details can be found in the report of survey results (PDF, Off-site Link). To stay current on the Fedwire message format, including the format that will go into effect November 21, 2009, check out the Federal Reserve’s Fedwire online resource center and future FedFocus and FedFlash^® issues.

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