Voice of the Industry

ISO 20022: the future of payment messaging

Tuesday 14 January 2020 09:31 CET | Editor: Andra Constantinovici | Voice of the industry

The migration to ISO 20022 is firmly on the horizon. In preparation, market participants must begin bolstering their infrastructure to accommodate the new standard, argues Deutsche Bank’s Christian Westerhaus

Change is afoot across the global payments landscape. Pinging on the radars of market participants for some time, the fast-approaching November 2021 migration of the world’s primary payment market infrastructures (MIs) to the ISO 20022 financial messaging standard is now looming large. 

The new standard affects all banks with many-to-many relationships in the correspondent banking space and all users of payments and cash management messages (MT categories 1, 2 and 9). While the project does not extend to corporate-to-bank traffic and is not mandatory for market infrastructures operating a closed user group in FIN (MI-CUG) formats, the implications for corporates will nevertheless be significant. 

This is not simply “another IT project” for banks, nor is it “just another bank project” for corporates. In the coming months, all market participants will need to take appropriate steps to assess and prepare for the upcoming transition. 

Inbound opportunities 

At its core, the migration to ISO 20022 will introduce a number of new data components, such as the ultimate creditor, ultimate debtor and the initiating party. When compared to existing formats, this means that the information transmitted down the payment chain will be far richer – increasing the transparency of a transaction and supporting financial institutions with their compliance obligations. 

It will also allow banks to improve their customer service, with richer data allowing for digital reconciliation with straight-through processing (STP). The standardised data format will also benefit corporates, allowing them to integrate vendors more flexibly into their own structures, for example.  

Participant preparations 

For global banks, each link in the payment chain – from the handling of structured payment-party information to the provision of camt statements – will be affected. The payment chain for regional banks will be similarly impacted, though with a greater level of flexibility. In both cases, senior management teams should be made aware of the magnitude of the migration to allow for the allocation of sufficient resources and budget going forward. 

Following the migration to ISO 20022, corporates will retain the option to use various other messaging formats for the initiation of payments. However, whether a corporate chooses to actively migrate to ISO 20022 or not, they will likely receive messages in the new standard from their bank. Since the quality and quantity of information contained in an ISO 20022 payment will be greater, this is something that corporates cannot ignore. As such, corporates need to begin conversations with their banking, enterprise resource planning (ERP) and treasury management system (TMS) partners to understand the impact that ISO 20022 will have on their payment and account information products. 

Recent developments

Market participants are not alone in their preparations. Over the past two years, global MIs and SWIFT – the global body steering the migration in the correspondent banking space – have ramped up their efforts. 

Some of the ISO 20022 guidelines have been developed, which market participants will need to study, understand and implement in the coming months. These include the High Value Payments Plus, or HVPS+, (in the one-to-many space), Cross-Border Payments and Reporting Plus, or CBPR+ (in the many-to-many space) and User Detailed Functional Specifications, or UDFS (in the local euro market) – with further updates scheduled.  

SWIFT has also begun to develop the requisite tools for the transition. Following the migration, outgoing SWIFT FIN messages will need to be translated to ISO 20022, and, in some cases, ISO 20022 messages will need to be translated to SWIFT FIN. To aid with this, SWIFT released the first beta version of its translation portal in June 2019 – with plans in place for the portal to go live in March 2020.  

Similarly, where payment infrastructures are not yet ready for ISO 20022, incoming messages will have to be translated from the new format to the old to allow for further processing. In response, SWIFT has developed several new translation services for incoming messages – the local translation and the central translation (available in-flight or via API). 

Moving in the right direction 

Significant and complex internal challenges lie ahead – for banks and corporates alike. The migration will not happen overnight but, equally, its implementation is fast approaching. While many will have already started their ISO 20022 journey, now is the time to accelerate these preparations. And for those yet to take their first steps, getting started must be top of the agenda.      

About Christian Westerhaus

Christian Westerhaus is Head of Cash Products, Cash Management, Corporate Bank at Deutsche Bank


About Deutsche Bank

Deutsche Bank provides commercial and investment banking, retail banking, transaction banking and asset and wealth management products and services to corporations, governments, institutional investors, small and medium-sized businesses, and private individuals. Deutsche Bank is Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific.

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Keywords: Deutsche Bank, Christian Westerhaus, cash management, corporate bank, ISO 20022, SWIFT, SWIFT FIN, cross-border payments, B2B payments, banking, corporate messaging, enterprise resource planning, ERP, treasury management system
Countries: Germany

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