Voice of the Industry

ISO 20022 deadlines press data management infrastructure

Tuesday 31 January 2023 08:56 CET | Editor: Oana Ifrim | Voice of the industry

Edward Ireland, Bottomline: Banks need to embrace a three-part journey to truly deploy the ISO 20022 standard and reap the many benefits it provides. 

If it were the World Cup, we would be at half-time. For track and field, it would be the semi-finals. Regardless of the analogy you choose to assign to ISO 20022, the point is that its adoption is nearing its first major milestone in terms of deadlines and mandates. And just as it does so, a familiar issue in a new guise has resurfaced and is causing distress: data management.

Edward Ireland Before you ask ‘wait, wasn’t this always about data,’ yes, ISO 20022 was and is about rich structured data, to be specific. The kind that can be supplemented by machine learning in a format that reduces fraud and increases actionable analytics. Along with this package comes a need to support the volume and structure of these new datasets. A recent Bottomline webinar series, and its associated polling, showed that it is by far the greatest challenge finance leaders face across all geographies. 

The need to solve for supporting ISO is urgent. The Bank of England has formalised its plans and the first key date will be June 2023, when the CHAPS system will migrate to ISO 20022, and then in the spring of 2024, the new settlement engine will go live. The market infrastructure deadlines in Europe are aligned with the CBPR+ deadline of March 2023, and most deadlines in APAC have already taken place (PhilPaSS - 2021, MEPS+, BahtNet, RENTAS & RITS – 2022) with the CHATS in Hong Kong deadline set for Q4 2023. This means that banks & FIs in APAC have had to include ISO 20022 much earlier on in their priority roadmap. 

While these deadlines may seem to be daunting for some, there is a fortunate turn here. The ability to support the additional data and structure of ISO 20022 mapped directly to its three stages of integration: Connectivity Only, Market Ready, and ISO Native. 

Webinar polling tells us that the majority of banks in the UK are prepared only for the connected, entry-level stage. The obvious benefit is that it's the lowest cost option in the immediate phase and meets the minimal compliance requirements. It also has the lowest impact on your current processing. At the Connectivity Only phase, a bank can still manage and support

ISO 20022 data provided it has a translation service. It can send and receive CBPR+ messages and can accommodate a translation from the MT ‘old’ format to the ISO 20022 MX format and then back again. But there are risks to this approach and it will require some form of translation and enrichment service. Transformation in this context involves converting the old format to a new one to support applications, market infrastructures, and counterparties. It will require a solution with the flexibility to update and expand mappings beyond published market practice.  Enrichment means the data must be supplemented with additional data sources to fully take advantage of all the options available. However, there are truncation risks (meaning the actual messaging has been modified to fit the MT messaging standard) and potential translation failure in switching from the MT to MX formats. ISO 20022 Connectivity Only is the minimal viable requirement and is a low-cost option. But it is not sustainable for the long-term as you will eventually need to be ISO Native by the end of the co-existence period in 2025. So why delay the inevitable and miss out on reaping the rewards of having ISO across your whole ecosystem as soon as possible? 

Next up is Market Ready. The difference here is that a Market Ready adoption will support all standards. If a bank can move to a Market Ready stage both MT and MX messaging can be accommodated. By upgrading to Market Ready, a bank can be more flexible depending on the capabilities of its systems. The advantage: It buys time to upgrade systems and data capabilities. However, when you are translating messages, it is important that you consider a long-term storage solution for your sent and received messages to ensure that you are able to reference them back if needed. Therefore, it is vital that you explore options to have an easily accessible repository, enabling complete visibility over all financial messages and turning data into insights.

ISO Native takes stages one and two to the next level. It requires full network architecture and assumes that legacy infrastructures have been upgraded. Here the full complement of ISO advantages can be accessed, including real-time payments and straight-through processing. Eventually, ISO Native will be the only viable route if a bank is to maintain its competitive footing and hit the deadline for the end of the co-existence period in 2025. ISO 20022 is now a global standard that we’re going to be using for the long-term and foreseeable future. And there is plenty of scope within it to support a lot of different business features and business opportunities. 

I’ll let my colleague Francois Maigre, SWIFT’s Head of Payments Go to Market for Europe, have the final word on the importance of going ISO Native: ‘Even at the beginning, we expect transactions will be initiated by those institutions that have completed their ISO consolidation journey, and those transactions will offer services to their end customers which are based on this rich data. But for other banks, the milestones are just that, milestones. It’s just the start of the journey, but the sooner you get ready for ISO payments and reporting messages, the better.’

Watch our on-demand webinar with SWIFT to learn from the experts  about best practice ISO 20022 adoption - APAC, Europe & RoW, and the UK

About Edward Ireland

Edward Ireland is Head of Product for Messaging & Connectivity at Bottomline. Edward has more than 15 years of experience in payments and financial technology. His current role is to drive thought leadership and solution development for ISO 20022 and the larger product set of Payments Transformation as a Service. Ed has a global remit for existing customers and new logo with areas of specialisation including operational resilience, security, compliance, and regulatory change.


About Bottomline

Bottomline delivers a single SaaS platform for payments, securities, and messaging that helps financial institutions and corporations to achieve lower costs, wider reach, speed-to-market, greater security, and improved risk management. 

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Keywords: ISO 20022, banks, cross-border payments
Categories: Banking & Fintech
Companies: Bottomline
Countries: World
This article is part of category

Banking & Fintech


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