The standard meets the needs of regulators, market overseers and reporting firms that rely on unambiguous data to draw meaningful analysis.
“The widespread adoption of ISO 20022 will generate new benefits for the financial industry. The common business language will accelerate the development of digital payments and improve cross-border transactions,” says Lisa O’Connor of SWIFT, Standards and Capital Markets, Asia Pacific.
A lack of common business and technical standards used by banks and other financial institutions can create frictions that result in limited interoperability and higher costs. Across the global payments ecosystem, even as collaboration and technology continue to improve, miscommunication persists due to a patchwork of standards. Infrastructure and processes require greater alignment.
This is why SWIFT has collaborated with the financial community to develop and adopt the ISO 20022 Standard.
Modern, open, globally adopted standards are key to realising the industry objective of making cross-border payments as immediate and convenient as domestic ones. The way for global and local requirements to co-exist is to provide the existing structure with the required information and the flexibility to include optional information. This is what ISO 20022 enables.
Out with the old
ISO 20022 has come from a need, recognised and addressed by the community, to ensure end-to-end interoperability among banks connected to multiple market infrastructures. The standard has already been adopted by market infrastructures in more than 70 countries, for payments and securities business, replacing domestic or legacy formats. In the next five years, based on current industry adoption timelines, ISO 20022 will dominate high-value payments, supporting 79% of the volume and 87% of the value of transactions worldwide.
A bank’s legacy payments infrastructure may limit the amount of information that can be included in a payment due to the absence of sufficient field space. Full adoption of ISO 20022 standards provides enhanced and structured data quality to help overcome the current limitations.
By harmonising existing frameworks, ISO 20022 will provide banks and financial institutions with richer and more structured data. This will allow banks to re-assess existing business models, derive benefits for their organisation and create value for clients.
In recent SWIFT events held in Japan, Hong Kong, Taiwan, and Australia, industry leaders noted that ISO 20022 will help banks accelerate their ‘big data’ efforts, enhance payment quality for compliance purposes, build new business opportunities for liquidity management products, and reduce cost in payment processing through the greater interoperability of payment ecosystems.
What ISO 20022 does is to enhance the rich, quality data exchanged between banks. The amount of data that can be exchanged, together with market practice, is where the banks will derive their value. This, combined with the use of the SWIFT network, means validated rules that will ensure less deviation in the quality of data end-to-end and party-to-party.
A flexible standard
More than just providing a common business and technical standard, ISO 20022 can help facilitate the adoption of new technologies such as artificial intelligence and machine learning. By speeding up the deployment and adoption of new solutions, it will ensure the payments industry is able to adapt and respond to customers’ expectations, as well as regulatory changes.
ISO 20022 is flexible enough to work with the latest technology and adapt to new technologies as they emerge. A practical example is open banking. As regulations require banks to open their systems to third parties, APIs are often the technology of choice for this type of interaction with financial institutions. SWIFT is working to apply ISO 20022 data dictionary expertise to data exchanged via APIs and to promote ISO 20022 as a common source of data definitions for messages and API specifications.
The rich, structured and consistent data provided by ISO 20022 is suited to meet the needs of regulators, market overseers and reporting firms that rely on unambiguous data to draw meaningful analysis. Information supported by ISO 20022 will dramatically improve the accuracy of know your customer (KYC), anti-money laundering (AML), and sanctions screening.
The benefits of ISO 20022 will be significant. It will allow smaller markets to internationalise faster and reach much further. And it will allow larger markets to enable fluid movements across the full currency ‘stack’ within their markets—between banks and other payment providers, card schemes, real time gross settlement (RTGS) and local clearing houses. End customers will benefit from speed, ubiquity and choice, while the industry will see a total cost of ownership reduction, increased ease of integration and more efficient business processes.
To promote greater awareness of ISO 20022 within APAC, SWIFT is organising workshops, webinars and meetings with major intermediary banks.
Migration to ISO 20022 is a significant undertaking for any bank or financial institution. But the good news is that there is a lot of support available from SWIFT to help banks with their information gathering and planning.
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