ISO20022 - Key Challenges & Opportunities

1. ISO20022
Key Challenges & Opportunities
Prashant Gavankar

2. What is ISO 20022 for the Payments
Industry
• The payments industry is continually evolving, with change driven by
various evolutionary business initiatives such as Open Banking, Real-
Time Gross Settlement (RTGS), distributed ledger technology (DLT)
and Instant Payments.
All of these developments are affecting banks and market
infrastructures, and adapting to them & absorbing their impact
requires resources and investments.
ISO 20022 is the agreed methodology used by the financial industry
to create consistent message standards across all the business
processes of the industry.

3. Key Challenges
• ISO 20022 Transformations
One challenge in ISO 20022 transformations is to onboard (or
migrate) corporate customers to use the ISO 20022 message
format. On boarding here refers to the technical preparation
work that enables the corporates to send and receive payment
messages using ISO 20022.
• Right Balance
The main challenge is striking the right balance between rich
functionality and simplicity of ISO 20022.

4. • Complexity
complexity of the ISO 20022 migration programs present major
challenges for financial institutions and particularly for those
connected to domestic payments and cross-border payment
schemes.
• To replace legacy system
to handle the new message format may require the replacement of
legacy systems, since these are often not suited to be upgraded
based on old technology.
• Gap Analysis
In many cases the full scope of changes required will only become
apparent after a thorough gap analysis, meaning a deeper
understanding of the ISO 20022 specifications is needed.

5. • Standardization
CHAPS, BACS and Faster Payments all have separate
requirements, methodologies, formats, standards and
rulebooks for constructing a payment in each system. It also
makes it challenging for new providers seeking to become
participants of these payment systems.

6. Opportunities
• Long term view
Initial priority for banks should be able to take long term view,
invest strategically for core payments processing capabilities
and work with their payments software providers to start their
migration journey early.
• To make streamline process
Benefit of ISO 20022 is developing streamlined processes, new
products and enhanced services for customers.

7. • Higher efficiency
ISO 20022 format provides the benefits of managing
reconciliation, exception handling, billing reporting and anti-
money laundering (AML) checks with higher efficiency.
• Lower maintenance
Lower information technology and maintenance costs,
improved reconciliation, and smoother cash transfer worldwide.
• To improve infrastructure
opportunities for banks and financial institution to adapt and
improve their wider infrastructure and make significant
investments in processes to handle the large volumes of rich
ISO 20022 payments data at a faster rate.

8. • Interoperability
information in an ISO 20022 message can be grouped together
based on common data components from different payments
methods and can be further reused, resulting in increased
interoperability.
• To prevent fraud
with a greater ability to develop value-added services, better
operational resilience, and effective fraud detection and
prevention measures.

9. • To improve data quality
Banks can now even leverage ISO 20022 and APIs as the
standard for data exchange in payments within the applicable
regulatory and compliance requirements in combination, all of
this means that the opportunities of migrating to ISO 20022
include improved data quality, as well as higher automation
and reduced costs.