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ISO20022
- 1. ISO20022 Key Challenges &Opportunities Prashant Gavankar
- 2. What is ISO20022 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 • ISO20022 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 ofthe 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, BACSand 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 termview 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 ISO20022 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 inan 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 improvedata 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.