Voice of the Industry

The ISO 20022 migration in Australia – insights from AusPayNet's CEO Andy White

Tuesday 4 April 2023 10:28 CET | Editor: Raluca Constantinescu | Voice of the industry

Andy White, the CEO of AusPayNet, elaborates on the purpose and benefits of the ISO 20022 migration programme in Australia, while also exploring what the future holds for cross-border payments.

 

On Monday, 20 March 2023, more than 11,000 institutions in over 200 countries and territories, their vendors and technology teams, and many domestic payments platforms went live with ISO 20022 for payments and related messaging. It was one of the largest migrations ever undertaken by financial institutions and represented a once-in-a-generation change. 

In Australia, 50 large domestic and international financial institutions migrated key pillars of the Australian payments system – the domestic real-time gross settlement (RTGS) system and High Value Clearing System (HVCS) – to the ISO 20022 message format, marking one of the most significant transformations of the Australian payments system in recent times. 

As Head of Payments Settlements at the Reserve Bank of Australia (RBA), Greg Johnston noted that ‘this is a strategically significant change for Australia’s payments system and the global payments community, creating the platform to meet the future needs of the payments ecosystem.’ 

 

The Australian migration programme 

Coordinated by our team at Australian Payments Network (AusPayNet), the successful ISO 20022 migration is the culmination of four years of collaboration between regulators and participants in the Australian payments industry and has been completed in alignment with the global upgrade of the cross-border payments system coordinated by Swift. 

The programme commenced with a consultation process facilitated by the RBA in 2019, in which the RBA recommended that AusPayNet manage the migration programme. It has since featured extensive collaboration between 50 HVCS participant financial institutions in building, testing, and implementing key aspects of the new messaging standard in Australia. 

The migration was the largest and most complex programme of work AusPayNet has undertaken to date in-house. As Mr. Johnston noted, ‘this type of large-scale, whole-of-industry initiative is notoriously difficult to deliver successfully, and all HVCS participants, together with the AusPayNet team, have done well to get everyone ready in unison, setting the bar for high-quality delivery and effective collaboration.’ 

 

The purpose 

So, why was this transformation necessary? 

A key challenge for the global payments industry is the proliferation of payment formats and standards, meaning payment networks and systems do not integrate well with each other. This introduces friction, which slows down payments and adds to their cost. 

Through implementation of ISO 20022 globally, interoperability can be achieved between payment systems and networks. By speaking the same language, overheads associated with translation and conversion can be removed. Payments will travel more easily between payment networks around the globe, increasing reach and overcoming the fragmentation found between systems and networks based on different formats. It also future proofs payments, meaning that new payments technologies in development can efficiently connect. 

Domestically, given ISO 20022 payment messages can carry richer, more enhanced and structured data, the migration will lead to significant improvements to process-automation, interoperability, and corporate customer experience in Australian payments. 

 

The benefits 

Among other benefits, the new messaging standard will allow more structured remittance information and identification of parties in the payments chain, aiding know-your-customer, anti-money laundering and counter-terrorism financing efforts, and sanctions-screening. 

Financial institutions will be able to create seamless experiences for corporate customers and ultimately deliver faster, cheaper, transparent, and more accessible payments. 

Internationally, this also supports the aims of the G20 leaders, who have supported an ambitious programme of work to enhance cross-border payments, including their speed, cost, transparency, and access. 

In a nutshell, fully adopting ISO 20022 will mean greater interoperability between payment networks and platforms, and that cross-border transactions between financial institutions will become faster, cheaper, and more transparent. The enriched data in ISO 20022 will enable financial institutions to better support their customers through value-added services. 

As Pat Antonacci, Chief Customer Experience Officer, Swift, put it, ‘financial institutions and infrastructures around the world have embraced ISO 20022 for its potential to unlock significant new opportunities in both payments processing and service innovation. AusPayNet’s successful migration puts Australia at the forefront of realising those possibilities.’ 

 

What next? 

Although a momentous transformation, this migration is just the start of the journey. The scale of the change is so significant that there will be a co-existence period between the old ISO 15022 standard and the new ISO 20022 standard for those using Swift, with the expectation that ISO 15022 will be phased out by November 2024 for domestic payments, and by November 2025 for cross-border payments. 

Also in March 2023, the Committee on Payments and Market Infrastructures (CPMI) issued a consultation on ‘ISO 20022 harmonisation requirements for enhancing cross-border payments’. The consultation aims to address the fragmentation and mixed use of payment messaging standards – and resultant friction – in cross-border payments, and to maximise the benefits of adopting ISO 20022 as a common messaging standard, especially by minimising variability in the ways in which ISO 20022 is deployed globally. 

AusPayNet’s implementation of ISO 20022 for Australia’s domestic RTGS and HVCS included harmonising the message format used by those systems with the previous ISO 20022 implementation domestically – Australia’s real-time payments system, the New Payments Platform (NPP) – and with the existing cross-border payments and reporting (CBPR+) standards. Australia is therefore well placed to ensure ongoing harmonisation as CPMI’s thinking develops in this space. 

 

About Andy White 

Andy has over 25 years’ international experience, incorporating roles at the Bank of England, LCH.Clearnet, and the Australian Securities Exchange. He is a graduate of Oxford University and AICD. Andy also holds advisory roles on the Payment Card Industry Security Standards Council, Emerging Payments Association Asia, and the editorial board of the Journal of Payments Strategy and Systems. 

 

 

About AusPayNet 

Australian Payments Network (AusPayNet) champions the payments system. We enable competition and innovation, promote efficiency, and control and manage risk to deliver improvements for all users of the payments system. Our network includes more than 150 members and participants, and we welcome involvement from all organisations with a significant interest in payments.


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Keywords: ISO 20022, cross-border payments, financial institutions, settlement, regulation, SWIFT
Categories: Payments & Commerce
Companies: AusPayNet
Countries: Australia
This article is part of category

Payments & Commerce

AusPayNet

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