The global adoption of ISO 20022 is the most far-reaching and widely underestimated development in payments today.

It’s not shocking that the transition hasn’t attracted the attention it merits. ISO 20022 is complicated and can seem downright mysterious even to payments specialists. The new standard has also been a long time coming. Some financial institutions began their migrations over a decade ago.

But the impact of ISO 20022 is rapidly approaching a tipping point. SWIFT has announced a global phased migration to ISO 20022 over the next three years. At the same time, key high-value payments system operators have announced their migration plans. Combined, these developments mean that for every financial institution, an ISO 20022 migration is now a question of “when” rather than “if.” By 2025 it will be the de facto standard for high-value payments systems of all reserve currencies, and will support 80 percent of transaction volumes and 87 percent of transaction value worldwide. In Europe, SWIFT and the European Central Bank have both announced go-live dates to November 2022 for the standard.

This means that banks are now facing firm compliance deadlines for ISO 20022. Any migration plan must balance meeting these deadlines with building towards a future-proof state. The complexity of ISO 20022 and the interdependencies of adopting a new industry standard make this easier said than done.

There are six key challenges that must be overcome:

1. Understanding the complexity of ISO 20022 as a new business standard

Payments providers using legacy tech will need to map those of their systems which pre-date ISO 20022 to the new standard using some kind of translation system. This will need to include the right rules for AML, fraud and compliance checks.

2. Addressing differences in specifications of different market infrastructures

Though all the new payment formats refer to the ISO 20022 standard, there are important differences between the implementation guidelines for different payment schemes (for example, HVPS+ and CBPR+).

3. Upgrading aging legacy systems

Legacy systems often can’t process or support the ISO 20022 format—or leverage the opportunities it presents. In these cases, the outdated legacy systems need to be updated, replaced or shielded from the impacts of ISO 20022 through convertors or translators. Upgrading multiple interconnected systems involves budget, which banks need to agree quickly with stakeholders and partners.

4. Drawing up the right timeline

With different markets setting different deadlines for ISO 20022 adoption, payments firms that operate across borders need to carefully plan their migration strategy—to say nothing of the complexities that can arise within an organization.

5. Managing the intense pressure to change

As complex and important as it is, an ISO 20022 migration is not the only high-stakes transformation project going forward at most banks. Combined with regulatory deadlines, this is a recipe for “design to budget” solutions that make minimum adaptations and provide a poor fit in the long run.

6. Implementing new data management

ISO 20022 messages can contain repetitive sections that multiply the length of messages up to hundreds of times. This dramatic expansion in data demands a redefinition of all infrastructure that will handle ISO 20022 data.

Given these challenges, what are the characteristics of a strong migration plan? Accenture’s extensive client work indicates five essential characteristics of a successful migration:

  • A clearly-defined long-term strategy
  • A comprehensive impact analysis
  • Robust and systematic project management
  • Effective internal communications
  • A future-proof technology and testing solution

People naturally get excited about the potential business benefits of any new system, and ISO 20022 could allow payments players to do some extremely exciting, innovative things. However, it would be premature at best and idle speculation at worst to consider new products and efficiencies before developing a strong migration plan and making the considerable tech investment that’s required. ISO 20022’s ultimate impact on an organization will also vary across different firms—a multinational bank with large corporate clients will get very different things out of the new standard than a regional bank with regional clients.

However, financial services firms of all sizes do share the same target in their ISO 20022 migrations: building a benefits case. In the next post in this series, we’ll look at why it’s important to do so at the very start of the migration process, and how to do it.


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