ISO 20022 – things to think about before the transition to the new file format

ISO 20022 – things to think about before the transition to the new file format

Swedish banks are switching to new file formats and the option to send salary payments using a BGC file, used by Swedish companies for decades, will come to an end. Here’s a summary of some important things to think about to help you plan a smooth transition to the new file format.

The background to the decision of Swedish banks to switch to the standardised ISO 20022 format for payment files is European Parliament Directive (EU) 2015/2366 of 25 November 2015. This relates to payment services in the internal market in Europe and requires all countries within the EU and EEA to adapt their payment solutions to the new common standard. 

The new format is being introduced in order to standardise payments at national and international level. Many banks already offer the payment of salaries in the new format alongside the use of the old BGC file. However, the use of the BGC format will gradually come to an end, so it’s important to plan your transition well in advance. The first banks to end the use of the BGC format are Handelsbanken and Danske Bank. Other banks are planning to follow suit but have yet to determine exact dates. Different banks will implement the change at different times. 

A well-thought-out project plan is needed

It’s important to keep an eye on news from your bank and read the information you receive as a customer. Salary payment is a very important process for all Swedish companies. All employees expect to have their salaries paid, usually on the 25th of the month. As an employer, you have an obligation to ensure the quality of the salary payment process throughout the transition to the new format. There are many parties who may be affected. There’s not only all the company’s employees, but also managers of payroll systems, payroll administrators, the company’s IT department, and the company’s management.

A number of questions to answer

  • What are the company’s current procedures for the creation of the payment file itself?
  • How is the payment file distributed to the bank and what is the current approval flow?
  • Which sub-processes could be affected in connection with the change of file format?
  • What software is used and will it support the new format?
  • Is it only the payroll system that is affected or will other software that is used to send and sign the bank file also be affected?
  • How are permissions managed for signing a salary payment file? 
  • What documentation should be created and updated in connection with the change of file formats? 
  • How are breakpoints and deadlines affected by the new format for your bank? 
  • How are procedures upheld so that the file is signed well in advance of salary payment?

In addition to significant differences between the old BGC format and the new xml format, you should be aware that there are also differences in xml files depending on which bank you use, as each bank has its own variant of ISO 20022. For example, there are differences in the data that these files should contain and breakpoints when the file is to be sent to the bank for correct payment on the 25th of the month. There may also be differences in what information about employee bank details needs to be collected in the payroll system in order for them to be correctly dropped into the file.

Do you as an employer have any questions about what’s happening? Get in touch with us here at Azets. We’re experts in payroll administration, HR, and accounting, and we offer advice to companies that need help.

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