How ISO 20022 is driving the payments industry transformation

  • By Bill Doran

The payments industry is on the brink of a massive transformation.

Fuelled by the widespread use of digital technologies and customer demand for fast and secure payments, the industry is changing the way cross-border payments are sent and received, argues SWIFT’s Bill Doran. 

SWIFT’s vision of making cross-border payments as fast and convenient as domestic ones has taken huge strides in recent years with the Global Payments Innovation (gpi) programme. 

However, further improvements and innovation will require modern, open and globally adopted standards. Enter SWIFT’s ISO 20022 program for cross-border payments, beginning in 2021 and to be completed in 2025. 

In a nutshell, the ISO 20022 messaging standard lays the foundation for an improved payments experience. It allows far richer and structured payment data to be transmitted as part of a transaction and this richer and structured information will support banks in guaranteeing both fast and secure payments processing, while complying with global regulations.  

Globally, ISO 20022 is being adopted in over 70 countries and is already live in Japan, Switzerland and China. In Australia, the Reserve Bank is driving a consultation on the migration of the Australian payments system to ISO 20022 and the New Payments Platform is already live using the standard to process around 1 million payments per day. 

As the migration picks up speed – with more and more market infrastructures migrating to ISO 20022 – financial institutions, vendors and corporates are working to base their systems on a singular data dictionary. 

For a successful transition to ISO 20022, institutions need to start testing in 2020 and therefore, begin planning now.

A common standard will ensure simpler interoperability within the industry, particularly for larger institutions that connect to multiple market infrastructures. 

The rich, structured and consistent data provided by ISO 20022 also supports regulators, market overseers and reporting firms which rely on unambiguous data for meaningful analysis. 

As an example, AUSTRAC will benefit from more structured and complete data to support their financial crime investigations and banks will have better data to support their KYC, AML and sanction screening.  

ISO 20022 supports innovation because it is flexible enough to work with changing technology. The introduction of the Consumer Data Right, or “open banking” is a practical example. 

As banks open their systems to third parties, APIs are often chosen as the technology for this type of interaction with financial institutions. SWIFT is applying our ISO 20022 data dictionary expertise to API specifications.

Finally, the end user will also benefit from speed, ubiquity and choice, while the ¬industry benefits from richer, more structured data that is consistent across varying payment systems. 

Legacy systems are one challenge of the move to ISO 20022, particularly across multiple business applications and channels.

Another is timing and resource planning. Intermediary banks have months, rather than years, to understand the business impact and budget for the migration. 

Ultimately, while the ISO 20022 migration is a large body of work, the benefits will far outweigh the resources ¬required and costs associated with moving to the new messaging standard. 

For a successful transition to ISO 20022, institutions need to start testing in 2020 and therefore, begin planning now.

Bill Doran is head of Oceania, SWIFT