ISO 20022: the foundation for the treasury of the future

The ISO 20022 migration is far from over. In the next phase, the focus for banks will be on supporting corporate treasury clients to unlock the full benefits afforded by the new standard. XMLdation explores the change in mindset this require.

Inspired by material from Harri Rantanen, who works as a business developer at Corporate Banking, SEB.

Over the past five years, banks have worked tirelessly to prepare for the migration to ISO 20022 across the majority of the world’s high-value payment systems, as well as the Swift network for cross-border payments. While the majority of implementation milestones have now passed, the ISO 20022 journey is far from over. A huge amount of work lies ahead to unlock the full suite of benefits promised by the new, data-rich global standard. They include improved compliance processes and transparency, greater interoperability and scalability to accommodate future innovations, and real-time processing for faster, more reliable transactions across global financial networks.

This ambition means that, far from being a highly technical, back-end project, ISO 20022 has the potential to serve as an active enabler for today’s real-time, digital economy. Nowhere is this more apparent than in treasury, where banks are beginning to ramp up efforts to support the migration among their corporate clients.

The real-time treasury vision

Treasury teams have begun to undergo a sea change, evolving from traditionally back-end functions to business enablers and advisors. Underlying these developments is the vision of real-time treasury – the ability to leverage up-to-the-minute information to optimise liquidity, cash flow, and risk management decisions instantly. In this way the treasury of the future will look very different – with full and smart process automation, full information control and artificial intelligence set to become the norm.

To achieve this, treasurers need to integrate new technologies and solutions that aim to streamline their day-to-day operations and thereby free up time for more value-added tasks. This is where ISO 20022 comes in. By offering a common platform and data-rich payment messaging, the new standard not only accelerates payment execution but also provides greater transparency and control over their cash flow and liquidity management – laying the building blocks for the future state of treasury.

Today, the majority of corporates will have some level of familiarity with the ISO 20022 format, as it is used for many batch-based or instant payments. Nevertheless, the incorporation of these messages for high-value and cross-border payments represents a steep learning curve – and the onus is on banks to make the consumption of these messages as seamless as possible. To achieve this, the way banks approach their relationships with corporate treasury clients is changing.

From product to systems thinking

As the treasury mindset shifts, the bank approach is moving in tandem – from product thinking to systems thinking. But what exactly does this mean? As an example let’s take payments, which have traditionally been viewed as discrete tools designed to fulfil a specific need for treasury – i.e. moving money from one entity to another.

To support real-time treasury aspirations, banks are no longer restricted to products in isolation. The focus has widened to create an integrated payment system that incorporates the underlying infrastructure, processes, and interdependencies that enable payments across a variety of channels and entities.

Each element – from customer access points, bank account management, the underlying IT and technological infrastructure and reporting mechanisms – must be harmonised to ensure a fluid, reliable, and scalable system for corporate customers. For example, by improving onboarding processes for complex changes like ISO 20022 – leveraging tools provided by companies like XMLdation – banks can improve access to the new standard, which, in turn, will help corporate treasury teams unlock the benefits at speed. Top of Form

Taking this approach one step further, banks should also consider improving factors external to their own payment systems, such as how they interact with customer ecosystems, the impact of diverging regulations and political agendas upon their operations, and how they address different market infrastructures.

By providing corporates with a more holistic system and ecosystem approach – one that is more tailored and aligned to the vision shared by tomorrow’s treasurers – banks can become enablers of the real-time treasury evolution. To support this, common standards like ISO 20022 are a necessary, foundational component, which is why the next stage of the migration to the new global standard needs to focus on securing greater adoption – not just among banks, but corporates as well.