ISO 20022, the new standardised messaging scheme for financial services, will bridge a fundamental gap in payments communication.
Currently, there are several domestic and international payment messaging formats that vary in structure, meaning and policies. Without a standardised system, we have the same difficulty humans encounter when trying to carry a conversation with someone speaking another language.
Go deeper with GlobalData
ISO 20022 provides a universal way for people and technology to understand financial payment instructions, allowing companies, public authorities, and individuals to exchange payments with greater efficiency and accuracy.
Global interoperability
Payment messages follow various formats based on payment networks and use cases (e.g. high value vs. low value; batch vs. real time). Variances cause payment information to become truncated or translated as it moves between banks, creating a challenge for organisations to seamlessly optimise payments products with multiple financial institutions.
Between jurisdictions and banks, there may also be a different understanding of terminology. In these situations, the sender and receiver of the payment will be required to communicate through external means to clarify the details of the payment. As ISO 20022 is syntax independent, it will align financial communication and enhance interoperability between systems and jurisdictions.
The standard will enable improved traceability for domestic and cross-border transactions which will, in turn, improve payments confidence, resiliency, and security.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThere will be a convergence of payment types triggered by ISO 20022. Specialised payment messages including EFTs (electronic fund transfers) and EDIs (electronic data interchange) will no longer be required, as they transition to a single ISO 20022 standard that will be adopted over time.
Improved profitability
Reducing the number of payment formats, nuanced processes and support resources is beneficial. Converging towards a single standard will result in lower overall IT support and operational costs, decreased technological footprint, easier maintenance and troubleshooting.
Along with improved accuracy and understanding of money movement, there will be improved clarity in predicting cash inflows and outflows. Organisations can also identify new revenue streams through product and service innovations that leverage the clean, structured data that make up the payment instructions.
Beyond payments
Opportunities to leverage IS0 20022 capabilities are abundant. With the ability to support both structured and unstructured data, the addition of dimensions in the payment message can produce new insights. Organisations can utilise rich data from ISO 20022 payment messaging to forecast customer or business needs across all industries, and deliver a customised experience for each client segment. With improved data quality, consistency and the introduction of new data fields, detailed transactional records can be leveraged for new opportunities.
Bringing it together
There are extensive capabilities that IS0 20022 provides to improve an organisations’ payments ecosystem and gain a competitive advantage. It is important to take a proactive rather than reactive stance for ISO 20022 with customers, suppliers and partners to reap the rewards. Organisations that are strategic in their approach to ISO 20022 can use it to deliver a superior customer experience, create new offerings, increase operational efficiency and ultimately improve profitability.
Alex Yip is a consultant at Capco
