Given deadlines for ISO 20022 adoption vary across markets and stakeholders, treasurers should be proactive in aligning communications on migration schedules between banks, vendors, and internal teams, and should request clear timelines from all affected parties. For corporates who have a less clearly defined timeline for ISO migration than banks, it is useful to set an internal schedule for adoption, factoring in testing and adjustment ahead of bank-imposed schedules.
Treasurers should then conduct an internal audit of which payment systems will be affected by the migration, assessing which systems will require technological updates and prioritising these changes according to roll-out schedules. System updates and integrations, such as database updates and user interface modifications, may be required to support the updated ISO messaging framework, and should be discussed with technology partners before going ahead. But this conversation should happen sooner rather than later, as the ISO 20022 stakeholder may need to make a business case to CFOs and wider teams for investing in an overhaul of digital infrastructure.
The eventual phase-out of address lines and the movement towards detailed address information means that every address in entire settlement instruction libraries needs to be refactored. Given the different address formats around the globe, there are few, if any, tools readily available to automate the conversion, so this will likely be a manual process.
When it comes to implementing the ISO-related changes, many tier 2 and tier 3 banks don’t have the budget, technical resources, or bandwidth to focus on the non-mandated changes for corporates. This means that the corporate will have to support both the old and the new standards concurrently. To mitigate this, corporates should strategically prioritise the migration, by targeting the banks that handle the bulk of payments and statements volume, and by planning to continue to support MT messages until the smaller banks convert.
On the other side, there is a lack of clarity regarding the steps corporates need to take to initiate the migration with their banks, with confusion surrounding who to contact and what to ask for. In my experience, it’s usually not the bank that takes the lead on these migration projects, though, there are banks in Europe that are actively pressing their clients to migrate.
There also remains the challenge of testing – how does the corporate ensure that the messages comply with each bank’s requirements? While many banks have published their standard in MySWIFT, getting access is often difficult. Most banks require corporates to email test messages to the bank where a human validates them and sends back the verdict. A few have self-service portals where you can run your own tests and see immediate results.
To corporates, I recommend taking control of your banking relationships and proactively reaching out to banks to schedule a migration project. It’s important to do this before the inevitable last-minute rush puts a real squeeze on their resources and your corporate project may be forced to face delays.
Transitioners should reframe their way of thinking around ISO 20022 – rather than seeing it as a compliance hurdle, it should be recognised for its ability to provide much higher quality payments data through detailed cash management statements and enhanced remittance information. This new data offers significant advantages for data analysis, real-time treasury management, and sanctions screening – all of which lay the foundation for corporate treasurers to digitally transform their treasury operations.
Updating digital infrastructure is crucial for ensuring the treasury function is as agile as possible, yet many corporates are still using clunky legacy systems. The ISO 20022 transition represents an opportunity for stakeholders to make the business case for fully transforming payments infrastructure, ensuring end-to-end processing chain readiness.
Corporates that have begun migrating to the new messaging structures have already seen the benefits – early adopters have found that their new banking partners, which already use a common messaging structure, have been easier to onboard.
At a time when treasurers across the globe are looking to cut operational costs and improve efficiencies, a standardised data format will best enable organisations to reap the benefits of time-saving data analytics tools.
A clear advantage of ISO 20022 is the readability of its messages compared to the often-cryptic SWIFT messaging format. The new messaging format uses clearly defined fields with identifiable tags and values, such as name, settlement date, and account numbers, which are more intuitive to interpret. Data previously recorded as free-form text in SWIFT messages, such as name and address information, is now structured in designated fields, making it more usable for downstream applications, including analytics and AI systems.
Cash forecasting is a key area that will see the benefits of this new, enhanced messaging format. With ISO 20022, treasurers can analyse the rich, granular data in payment messages to make better-informed projections of future cash flows. The data can also be analysed to generate more accurate liquidity forecasts, enabling companies to react and adapt to a wide range of macroeconomic scenarios, mitigating risk.
AI and ML are central to unlocking the power of an organisation’s data; however, the efficacy of these models is inherently tied to the quality of data they are trained with and operate on. As such, the ISO 20022 messaging format will provide treasurers with a repository of detailed, organised and readable data in a standardised format, which is ideal for underpinning functioning AI- and ML-based automation and cash forecasting tools.
These technologies can then reduce the time spent on repetitive tasks, such as cash forecasting and cash-tagging by speeding up the cash forecasting process, or can be deployed to analyse and predict patterns from large volumes of cash transaction data.
Jerald Seti, VP Product Management, joined Openlink/ION in 2004. He provides bank connectivity and transaction lifecycle management solutions for corporate treasuries, financial institutions, and central banks. Before ION, Jerald served as Capital Markets Product Manager at MISYS and prior, he improved automation at Wall Street firms. Jerald holds an MBA from NYU Stern School of Business, and a BA in Economics from New York's Binghamton University.
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