The mandated switch to the data-rich ISO 20022 payment standard is more than just a compliance exercise. It will pave the way for the future of cross-border payments. Even though the migration start date is almost two years away, the transition’s scale, complexity, and cost will be a daunting task for many financial institutions.
As part of our continuing “Decoding the Buzz Series,” I speak to both Oracle and SWIFT experts to cut through the buzz around ISO 20022 and talk about how banks can begin to drive value today from this migration and set the stage for a seamless transition. Joining me in this discussion:
Let’s jump in!
Sam Shaqareq: SWIFT’s ISO 20022 migration is considered pivotal. As domestic market infrastructures and banks align with SWIFT’s plan, is it fair to assume that the industry should be looking to SWIFT for industry guidance?
Andrew Muir: To SWIFT, and the PMPG, and the CBPR+ group – these are the experts created by and for the community. We collaborate to develop standards and guidelines the industry uses to process financial transactions automatically. This is an incredibly great effort, however. It involves thousands of banks, many countries, and hundreds of items in the overall scheme. Therefore, it will truly take a community—including technology providers and innovators—to bring about a payment revolution.
SS: What does the ISO 20022 transition mean from a change impact for banks?
Shriyanka Hore: The impact is multi-layered. I think of it as a pyramid. At the bottom are the ISO 20022 data model and the conversations around scheme interoperability that banks have with their vendors and SWIFT. The middle tier includes the bank’s internal payments topology that has to be rewired. The way data flows through a bank will change with ISO 20022. The way data is accepted, validated, stored, handed-off, analyzed, and learned from will also change. At the top of the pyramid is the customer experience and how ISO 20022 will enable customer-centric innovation, including broader personalization and insights.
The challenge for the bank: “How do we move to the ISO 20022 world, rewire internal systems, scale to timelines, and ensure governance, insight, and momentum?” These are the conversations we, at Oracle, have with our customers. We’ve spent the last five years working to become native ISO 20022, so we’re ready to guide our customers confidently into this new era of banking services.
SS: We’ve seen SWIFT’s ISO 20022 migration delay have a domino effect on other networks planning to go live. Has the momentum slowed?
Ernie Fiore: Not at all. The three-year transition window not only sees the banking community changing from SWIFT MT to ISO 20022; many market infrastructures also will be moving from proprietary messaging to ISO 20022. When we first started this program, we operated under the basis that we would bring ISO 20022 online in November 2021—thereby essentially making it mandatory for banks to handle ISO 20022 payments from day one. The new approach essentially enables banks to move from their existing messaging infrastructure to ISO 20022 at a pace that works for them.
SS: What challenges did the delay solve? Does it introduce new challenges?
Shriyanka Hore: The new approach solves challenges associated with synchronizing the move to ISO 20022 across different schemes, but there are still obstacles related to enablement and integration in their internal topology. Important questions remain: “How do we consolidate investment into one platform that can cater to the various schemes moving to ISO 20022? How do we manage change programs with overlapping timelines?” Governance is a big issue. Determining and driving ROI is another, as is implementing KPIs as banks progress in their journey. To drive the true benefits of rich data in the payments strategy, it is critical to start early for the effective realization of ROI and to benefit from a longer innovation cycle at the end of 2025.
Oracle is helping customers address these important issues, and agility is vital. Irrespective of the bank’s size, we aim to enable our customers to move to an ISO 20022-native platform with centralized processing that can unlock the benefits of rich data.
SS: How is SWIFT easing the challenge?
Andrew Muir: The days in which SWIFT takes a secure piece of information and passes it to the next point in the chain are over. Ahead of the transition to ISO 20022, we transform the SWIFT platform to enable end-to-end transaction management capabilities that significantly increase efficiencies and reduce costs across the entire ecosystem.
Our transformed platform will also ease the financial community’s adoption of ISO 20022. ISO 20022-based messaging will start from the end of 2022, and coexistence with the MT standard will continue until November 2025. During this period, the platform will act as a bridge between formats, enabling financial institutions to migrate at their own pace and providing central mapping and translation services so that the value of richer data can be captured by the whole community.
With our new platform, we will also maintain a central, secure copy of the transaction and enable banks involved in that transaction to see it and enrich the data associated with it. There are some practical things we need to do to make this happen. First, ISO 20022 is a new language. We’ve built several tools and resources to help the community learn this new language, including e-learning resources on SWIFTSmart, FAQs, interactive Q&As, documentation, and a translation portal. We also conduct tailored training and readiness assessments.
SS: How will ISO 20022 benefit the end-user?
Shriyanka Hore: ISO 20022, so far, has been about how the bank enables itself. But the conversation is moving beyond financial messaging to innovation. Corporates will see changes in their overall payment experience in terms of straight-through connectivity and intelligent automated reconciliation. Payments are going to be more traceable and faster. The broader banking ecosystem will also change. Banks will be able to open up APIs and on-demand insights to improve the customer experience. Payments data that flows through the economy will enable central banks to get innumerable insights into how the economy is functioning. Banks will be able to drive deeper customer relationships. This is only the beginning.
The transition to ISO 20022 will require careful planning and patience. For institutions that carefully map and execute their plan, the benefits of data-rich payments will be immediate and powerful. To learn more about how to chart and ensure a successful ISO 20022 journey, listen to our on-demand webinar with these industry experts.
To learn more, feel free to message me to explore more or have a conversation.
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