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Implementing ISO 20022 - five top tips for banks

The new global payments standard will deliver many benefits for financial institutions. Here’s what you can do now to ensure you’re ready to take full advantage.

As ISO 20022 – the global payments standard that will overhaul the way banks send payment instructions – edges closer to full implementation, financial institutions are at varying degrees of readiness.

With such a complex transition to embark on, most banks will want to ensure they are ready in plenty of time – to iron out any issues and protect against any disruption to their payments processes, and to be in prime position to reap the benefits.

The migration to ISO 20022 (or MX for short) is underway across the industry, with some jurisdictions using it today for domestic and regional payments. The migration of SWIFT and a wide range of RTGS systems effectively takes place between November 2022 and November 2025, with SWIFT, Target2, Euro1 and Step1 migrating in November 2022. CHAPS will start the migration in June 2022 on a like-for-like basis and complete the migration to the extended format in February 2023. Fedwire and CHIPS are scheduled to migrate in November 2023.

The benefits of tomorrow

There are multiple benefits for banks transitioning to ISO 20022. The first is the ability to better support more complex treasury models (payment factories and in-house bank structures) through the introduction of the Ultimate Debtor and Ultimate Creditor fields, as well as richer and more structured remittance information.

More structured and richer data also creates opportunities to improve and automate the reconciliation of transactions and accounts – with the number of payments that fail or are rejected because of incomplete or incorrect information expected to fall.

The new format will also support improved compliance, enhancing sanctions screening, anti-money laundering and fraud detection. These processes should become more efficient through a lower number of false positives, and more effective because of the stronger logic that can be introduced using, for example, structured address information.

The greater flexibility delivered by ISO 20022 will also provide more opportunities for innovation, better product development and faster responses to changes within the industry. A key consideration is when this format is used for different types of domestic payments (e.g. SEPA CT, Target2, Euro1) and when this format is used in different geographies in a – broadly – standardised way. Driving towards a ‘build once, use many’ position is critical for the industry.

These benefits enable Financial Institutions and Non-Bank Payment Service Providers to drive a better user experience for their underlying customers.

Five key steps for implementation

To put themselves in the best possible position to seize these opportunities, there are a number of steps banks should be taking now as they position themselves for the full transition to ISO 20022.

The complexity of transition and some fast-approaching initial milestones mean there are good reasons for banks to act now to ensure they are in the best possible place for a smooth transition and to seize the opportunities available.

To find out more around the transition to ISO 20022, or to get support from our Financial Institutions specialists, contact your Relationship Director today.

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