ISO 20022 Myths - Busted!

In the recent webinar conducted by our partner Expleo, we helped to debunk some myths surrounding ISO 20022. Expleo has vast experience with banks’ change programmes, and XMLdation has worked with banks on ISO 20022 since 2009.

We’re sharing the myths that Expleo and XMLdation debunked, in case you missed the webinar:

Myth 1: ISO 20022 Migration or adoption is a simple messaging or mapping change

Fact: ISO 20022 Migration to the new payment message likely impacts the entire payments process

The complexity of changes required for successful migration is not be underestimated – the transition is not merely an upgrade of processes or a mapping exercise.

Some might see implementing a new message format as a “low impact” project, but that would be incorrect. After wide adoption in Europe, in the early days of SEPA, the ISO 20022 standard’s application is now broader, and the format has matured to become the dominant message used, or planned, for real-time payments. Now, with major RTGS and high-value payment systems (HVPS) globally moving to ISO 20022, the migration will have a profound effect on anyone involved in the payments industry.

Adoption brings three key challenges:

• Integration for different institutions creates varying levels of challenge, depending on existing legacy systems and infrastructure …
• … because outside of IT systems, banks need to consider business rules, and that many work-flows will be significantly accelerated due to automation; compliance must also keep up
• In many respects, banks will be forced to accommodate greater and richer data sets in payments messages, and thus will have to adapt to increased complexity and variety that ISO 20022 allows, which requires changes to both the payments format and the way data sources are utilised for capture and transmission

In short: adoption of ISO 20022 is not a place to cut corners – to map is to trap.

Myth 2: ISO 20022 (CBPR+) deadlines have been extended; there is no urgency to be compliant 

Fact: The CBPR+ guideline must be seen in conjunction with new payments system implementations in some countries that are considering a big-bang approach based on ISO 20022

Some key dates are:

• November 2022:          ISO 20022 messages go live on SWIFT
• Between 2022-2025: Coexistence period for the legacy MT standard and ISO 20022
• 2022 and 2023:            Respective adoption of ISO 20022 in the UK and US

In any case, considering the advantages of ISO 20022, banks should carefully consider the risk of losing competitive advantage by NOT implementing ISO 20022 ahead of the deadlines. The standard has already been adopted in several countries, and the next four years will see the migration of some remaining major markets (EUR, USD, GBP). Financial institutions without strict regulatory deadlines will still need to be prepared for the global shift to ISO 20022 – as MT is no longer able to support the level of information clients are, and will be demanding. Early adoption will mean that banks and their clients can benefit from the data rich format, and not fall behind competitors, which includes other banks and fintechs.

Myth 3: One approach fits all

Fact: Your approach should be based on your bank’s strategic vision, your clients’ needs, and the complexity of your systems and processes.

Each bank’s approach is obviously dependent on its legacy systems and infrastructure, which may not be able to fully accommodate the transition to ISO 20022, with the risk of delaying the r opportunity to improve services. Also, keep in mind is that it’s not just data richness that needs to be addressed – data capture is also a key consideration, including from sources like e-banking and treasury portals, invoicing systems, ATMs, as well as from paper forms.

Myth 4: Short-term replacement of your existing processing systems is the only solution to achieving compliance with ISO 20022 messaging standards

Fact: Alternatives, including short-term “bridge” solutions are available to achieve compliance, and can allow you to buy time for further planning and migration

There is value in financial institutions taking a strategic, phased approach for ISO 20022 adoption – especially those banks that participate in different correspondent banking networks and payments infrastructures. It will help if you can break the required changes into bite-size-steps that would run either concurrently or in sequence. Even a phased approach, when looked at strategically as one long term project, will likely provide better returns on investment in ISO 20022 infrastructure, save costs and help avoid additional complexity. Working with an expert partner to evaluate how to approach the adoption will help build understanding about key tasks, how to prioritize them to keep your competitive advantage, and the tools available to help you along the way.