Implementing a new payments language isn’t straightforward:
Whilst introduced nearly 20 years old, the ISO 20022 standards have only begun their journey to widespread adoption in the last few years. Designed to produce a global standard for the electronic communication and interpretation of financial transaction data, its goal is to enable seamless payments within and across borders, encouraging Fintechs and incumbents alike to take advantage of the benefits it offers to innovate around the services offered to customers.
ISO 20022 brings some great opportunities, including richer data models, flexibility, interoperability, and XML formatting. The adoption of ISO 20022 is expected to bring benefits such as enhanced efficiency in processing payments, improved data quality, reduced errors, and better compliance with regulatory requirements. Many financial institutions and systems worldwide are in the process of transitioning to this standard, with key dates for implementation varying by region and application. The Organisations set to drive the biggest returns are those who recognise the transformative nature of the services that can be offered and invest in ISO20022 native applications.
However, implementing ISO 20022 is by no means an easy ride. Without the right planning and groundwork, it can be an expensive & complex mission, which drains resources.
Our experience of working on these implementations with clients can be distilled into these 5 key recommendations:
Data Strategy/Adoption: Understanding the new language of ISO 20022, which offers a structured format and new data model, is essential. Prioritising industry compliance and commercialising new features is recommended. It’s important to support structured data requirements, considering the impact on storage and leveraging 3rd party information with a data inventory.
Phasing Strategy: Early assessment of existing correspondent and FMI relationships is critical, along with defining a clear rollout strategy. Banks must navigate new compliance challenges and decide on approaches like Core Payment System replacement or Legacy Systems with ISO wrappers.
Governance: Effective Organisation-level planning, clear communication strategies, and executive-level sponsorship are crucial. There should be clear program outcomes and agreed-upon criteria for various phases of the migration.
Testing and Validation: A comprehensive testing approach including E2E validation, internal and external stakeholder communication, and client testing using Swift MyStandards is highly recommended. Testing should cover real production use cases, involve other banks, and include both “happy” and “unhappy” flows.
Post Implementation: The migration normally involves three phases – the start of coexistence, migration to MX across MT 1, 2, and 9 message categories, and the adoption of enhanced and structured data. It is crucial to engage with corporate clients early for the adoption of enhanced data.
The implementation of ISO 20022 is a significant development in the payments system, offering benefits in terms of information and structured data leading to potential process automation. The journey is long and challenging, requiring continuous updates and resources.
May Business Consulting has deep expertise and marries both subject matter experts with Programme Managers who’ve lived the migration journey. They can help you to plan and execute an ISO 20022 migration project effectively, addressing challenges related to governance, data strategy, business phasing, testing, and post-implementation evolution. Get in touch for further information using the link below to speak to our lead Partner.
