The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is driving the move. ISO 20022 aims to introduce a single message exchange mechanism for payments across the globe. The standard allows for better-quality data in payment processing and settlements. SWIFT has set a 2025 deadline by which all users in its network must have transitioned to this messaging standard.
The adoption of the international standard is based on the increased regulation, ever-evolving cybersecurity threats, and customer demands for faster, more cost-effective payments. The adoption begins a move away from the legacy proprietary messaging format Swift Message Type. ISO 20022’s Extensible Markup Language (XML) is to replace this legacy format. The plan is for ISO 20022 to improve compliance and transparency.
The planned migration to ISO 20022 highlights the effort made to modernise South Africa’s domestic payments infrastructure. The South African Multiple Option Settlement (SAMOS) system is owned by the South African central bank, which began the adoption of the new standard in September 2022.
XML is a language and file format which stores, transmits, and reconstructs information. The file format allows for the exchange of much more detailed data. Such data includes the details of remittance, the purpose of payment, the original source, and the final beneficiary alongside extra supplementary data.
From a more technical perspective, ISO 20022 messages have XML tags that give more structure, a readable name to each element in the message and clearly show where each element starts and ends.
These XML tags aid in the compliance process, as data can be more accurately screened when presented in this structure than in unstructured legacy formats where it can be difficult to match data in a text string to the correct element. Definition provided by XML tags can prevent payments from being incorrectly flagged due to sanctions concerns, as a word or phrase can be screened in context during the screening process. This can allow financial institutions to spend less time investigating incorrectly flagged payments, saving both time and resources.
As richer payment data that is ISO 20022 structured and standardised is adopted across the universe of payment infrastructures, and information can flow from one nation to another without alteration, banks will have a greater opportunity to harness the power of data in the payments ecosystem.
ISO 20022 is being implemented across markets globally as the new benchmark standard in payments messaging. By 2023, it is expected that ISO 20022-enabled systems will represent 79% of the total volume and 87% of the total value of high-value payments worldwide; for low-value payments, those figures are set to be 65% and 53%, respectively.
South Africa’s financial sector has already taken a step towards modernising the country’s payment ecosystem with the adoption of the new global messaging system. It has been adopted into the current real-time gross settlement (RTGS) system. Participant banks and other financial market infrastructures (FMIs) have also adopted the new system.
This forms part of South African Reserve Bank (SARB)’s efforts to modernise, as outlined in the National Payment System Framework and Strategy/ NPS Vission 2025. The central bank has been on a drive to change how it deals with new types of transactions and an ever-evolving economy.
The SARB owns and operates the South African Multiple Option Settlement (SAMOS) system, which facilitates the settlement of domestic individual high-value payment transactions, retail transaction batches, and bond and equity market settlement obligations.
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