There’s no two ways about it: ISO 20022 is a complex new standard for financial services firms of every description. Inside that complexity lie some operational hurdles for payments players—but also tremendous opportunities.

We can see why by looking at the ISO 20022 message format, which neatly encapsulates the high-level impact of the new standard. The format will allow, for the first time, rich business data to travel alongside a payment, end-to-end from the originator to the beneficiary systems.

The potential for this richer data to transform business models and operations is virtually limitless. Possible uses include:

  • More stringent anti-money-laundering checks and other financial crime prevention measures
  • Lowering costs through improved reconciliation
  • Powering customer experience transformation
  • Improving data-driven decision making
  • Improving customer service

The new standard will allow payments players to re-imagine and transform their businesses from the inside out based on rich, contextual data. Other key benefits include:

  • Improved compliance, risk management and innovation
  • Higher straight-through processing rates
  • Faster speed-to-market for new products
  • Improved machine readability and standardisation

What does this look like in practice? A new joint whitepaper by Fiorano and Accenture details three compelling examples.

The first is payments trend analysis. ISO 20022 enables radically improved payments trends analytics and predictions for corporate customers. By analysing fields like payment method, number of transactions, amount, and requested execution date, insights into the average values and volumes of payments made by each corporate customer can be improved. This provides crucial inputs into cash flow management strategies.

The second is liquidity trends and projections. As corporate customers expand into new markets, boosting the volumes of domestic and cross-border transactions, the requirement for banks to provide quick and easy access to liquidity, and to mobilise this across geographies, becomes ever more important. ISO 20022 allows easy and simplified reporting on the overview position of receivables and payables by currency, as well as insights into the average value of payments, based on historic data, to improve projections for the days ahead. Monitoring and projecting trends is enhanced by both.

The third is purpose assessment and hyper-personalisation. Code assessments of transaction purpose categories from ISO 20022 messages enable the analysis of categories and the frequency of transactions. This in turn makes it easy to identify cross-selling and up-selling opportunities.

Embracing the future

In an ideal world, all banking systems will eventually become ISO 20022 native. This would eliminate the need for translation and transformation between internal and external market systems and realise tremendous efficiencies for the industry.

But history suggests that the road to universal adoption will be bumpy. The new standard is complex. Implementing it will require major investments, major collaboration within the industry, and major risk mitigation.

Experience in other markets and insights from early migrators reveal that ISO 20022 demands a business-critical migration programme with senior management support and visibility across the organisation. The complexity of requirements, combined with the long duration of programmes and the broad scope of compliance issues, calls for fundamental transformation of both infrastructure and business divisions.

As with most new standards, ISO 20022 presents payments players with a choice: do the bare minimum to comply and avoid sanctions, or transform to embrace the new standard and innovate.

If you need help deciding which makes sense for your organisation, I would love to hear from you. I can be reached here.

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