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Specific-Group Germany GmbH
Specific-Group Nordrhein-Westfahlen GmbH
Rheindorfer Strasse 3
Specific-Group Germany GmbH
Mainzer Landstraße 69
60329 Frankfurt am Main
TARGET2 / TARGET2-Securities Consolidation
Harmonization, efficiency and security in pan-European payment services are in the spotlight for some years now. The next evolutionary stage is at payment provider’s door steps – Quo vadis payment services?
What will happen during the T2/T2S consolidation?
Payment transaction services – primarily between financial institutions – are profoundly shaped by change:
- Introduction of SEPA in multiple stages; last step with direct debits in 2014
- TARGET2-Securities (T2S) in June 2015
- Target Instant Payments (TIPS) in November 2018
The transition is focused on harmonization and integration of the European monetary infrastructures.
Remarkable improvements in terms of unified processes have been made within the areas of cross-border interbank payments and securities trading in Euro.
With the initial phase of the consolidation of T2/T2S on one single shared platform starting now, the Eurosystem aims for improvements in efficiency and security as part of their „Vision 2020“:
- Efficiency through a common technical infrastructure
- Optimization in current services and usage of a modern standard in financial messaging (ISO 20022)
- Strengthened resiliency in terms of cyber-security
- Introduction of a platform wide liquidity management
- Prepare for multi-currency readiness
Talking about change, the connectivity is also undergoing change from the way things are handled in the current situation. Since the financial institutions will be able to choose among multiple network service providers, the connectivity to the TARGET platform will be exposed to more competition.
Who is affected by the consolidation to which extent?
All financial institutions that are directly participating in TARGET2 or TARGET2-Securities are required to act.
Any financial institution which is currently indirectly participating through the so called “co-management” functionality via a direct participant in order to manage their minimum reserve is also impacted.
There is no alternative besides the adaption to the new consolidated platform. There will be no transition period for the migration. Only the migration within the defined time frame will ensure that
- liquidity provision in central bank money
- participation in open market operations
- utilization of standing facilities
will be available to the single institution. This is valid for all TARGET services RTGS, T2S and TIPS, that will be available only through the new infrastructure without any exceptions.
Depending on the type of business, each financial institution will be affected differently but changes will be profoundly altering it in business, technical and process dimensions.
Where is the benefit behind the consolidation?
Benefits of the consolidation of T2 and T2S stem from standardization and harmonization of processes across all TARGET services:
- Standardization in messaging by usage of ISO 20022
- Saving potential in operating costs through technical consolidation and increased competition among network service providers
- Optimization of treasury processes by enhanced liquidity management features
- Enable instant payments in context of settlement and liquidity provisioning
- Simplification in operations of data management, billing, business day management and user administration
When to start the migration?
Now – the German central bank communicated the roadmap to the “Big Bang” in November 2021 to all TARGET participants in October 2018. Also, it will take on its role as governing body assigned by the ECB in order to track the progress of all affected financial institutions in the German market.
The upcoming milestones are coming closer each day and increase pressure on a timely and thorough execution of the preparation activities.
How can Specific-Group support you?
Specific-Group Germany GmbH has experience in managing projects within the payments area for multiples years.
Starting from the conceptual phase up to the support with product launch, we can support you with expertise and technical know-how.
Our analysts and project managers act as an interface to our software architects and developers to ensure a smooth service delivery and communication with a single contact person throughout all project cycles.
Our quality engineers ensure a flawless progress in the development process while our automation experts ensure sustainable high quality of work products along the development cycle.
We offer you SME consulting and IT services along the complete milestone plan for the T2/T2S consolidation:
- Subject matter expertise in payment transactions
- Project and work stream management for the entire project or sub-projects
- Business and technical analysis of architecture, IT-systems, business processes and organization
- Support in business cases, decision process and stakeholder management
- Technical support in switching from SWIFT MT to ISO 20022 financial messaging format
- Software development and legacy system integration
- Training material creation and employee trainings
- Usage of proven Tools to reduce complexity in testing of payment transaction systems
- Ensure quality of work by automated testing
- Go-live support and ongoing partnership beyond the first business day after go-live