March 10 2025, is the date that ISO 20022 becomes the universal digital language for US financial services and by November 2025, Swift will officially leverage a globally shared language that provides valuable enhanced data. But regardless of these looming dates, the challenge right now in the marketplace with ISO 20022 is that the use cases and capabilities, the power of this rich new data, is not fully realised. In fact, we haven’t even begun to scratch the surface.
ISO 20022 the default
A variation of messaging standards have pervaded the industry and become the norm, but we haven't before had a consistent messaging standard across platforms and regions. ISO 20022 is driving towards this standardisation globally; we’re seeing this with Real Time Payments (RTP) in the US, with the Single Euro Payments Area (SEPA), New Payments Platform (NPP) in Australia, Unified Payments Interface (UPI) in India and all new payment rails in the global network. ISO 20022 is fast becoming the default messaging standard.
Not just a tick box
But when it comes to the messaging, everyone seems focused on the basics that you need to capture to facilitate the payment or transaction, to store it and meet your regulatory obligations. But there is so much more power in this data than we’ve previously had.
As an example, we’re already seeing testing in the market around leveraging the ISO 20022 messaging data in real-time to check for fraud, undoubtedly the single most critical challenge right now for financial institutions (FI). In fact, it is critical to your core competencies that you have a firm approach and resolution to minimising fraud, if not eradicating it altogether. ISO 20022 is rapidly emerging as a valuable dataset that may be one of the most valuable tools in this effort. But there are many more use cases that you can leverage with the data, and the businesses that investigate and utilise this will have a competitive advantage.
What does ‘my vendors are taking care of it’ mean?
But there’s something else taking place in the market. We’re finding that when we’re asking FIs if they are prepared for ISO 20022, they come back with ‘yes we’re ready’. But when I probe further - you have all the processing, translations and storage resolved then, correct? Where are you in the process? They’ll typically come back to me with ‘my vendors are taking care of it’.
What does that mean? It likely means they are going to pass through the minimal viable data set needed to pass the bare minimum of regulatory standards. Or it could mean you’re getting a full body of information that could allow you to leverage that data for fraud. But you need to clarify what will be given to you by your vendor versus what you will need to specifically ask for.
Get digging – now
So, when your vendor is ‘taking care of it’ please ensure you understand exactly what this means and how it is going to benefit your organisation. Dig deeper and start digging now. Don’t wait for a notification from the regulators wanting to see a certain piece of information that isn’t being passed to you. You don’t want to find out at that point that you don’t have it. Be proactive and make sure that you’re working with your partners to understand what they’re going to do, how and what the impact of that is on you.
Strategic competitive implications
You also need to consider if there are any competitive challenges you see. Do you have access to the full suite of information in the messaging standard or do you only have access to 10% of it? Because if you only have 10% and your competitors have access to far more, you should be concerned. Consider the strategic implications of this data and where it could take your organisation.
Stakeholder engagement
Key to this too is engaging with your stakeholders and understanding what data they use today and what data they might benefit from using in the future. That’s a very powerful conversation to have and if you can drive a 10 or 20% improvement in something with a more robust data set, why wouldn't you?
Scalability
Think too about capacity. What do you need to support this new data if you’re bringing it into your organisation? For instance, you could need a more dynamic model such as cloud capabilities versus a mainframe.
ISO 20022’s rich data can open up some big benefits for those who embrace the opportunity. It’s a giant evolution in the global payments ecosystem and will help to usher in the new era of automation and interoperability. This will mean efficiency and innovation gains and improved insights on your customers.
There’s a phrase making the rounds currently ‘data is the new oil’ as FIs you’re already used to having this data but for it to be valuable you need to refine it. ISO 20022 is the framework that gives you access to rich data in a structured way. Properly refine the data and you’ll not only be prepared, but you’ll likely be well ahead of the competition.
Here’s a checklist to help you with ISO 20022 preparedness:
- Understand the standard: Familiarise yourself with the messaging standard, including its XML schema and message types. Review the various message formats and what changes from the current standards.
- Assess your current systems: Evaluate your existing systems, platforms and processes to identify what needs to be updated or replaced to support it.
- Plan the transition: Develop a roadmap, include timelines, milestones and resource allocation. Plan for both the technical and operational aspects of the change.
- Engage with stakeholders: Communicate with all relevant stakeholders, including vendors, partners and clients. Understanding their readiness and aligning your transition with theirs can help avoid disruptions.
- Upgrade or implement technology: Determine whether you need to upgrade your current systems or implement new ones to support ISO 20022. This might involve updating software, hardware, or both.
- Testing: Conduct extensive testing to ensure that your systems can correctly handle ISO 20022 messages. This includes unit testing, integration testing and end-to-end testing.
- Training and support: Provide training for your team on the new standard. Ensure that support structures are in place to handle issues that might arise during and after the transition.
- Data mapping and conversion: Map and convert data from your current format to ISO 20022. This may involve data cleansing and transformation processes.
- Compliance and documentation: Ensure that all aspects of your transition are compliant with relevant regulations and document the processes and changes made.
- Monitor and review: After implementation, monitor the system’s performance and review the transition process to identify any areas for improvement. Address any issues promptly.
- Stay informed: Keep up to date with any changes or updates to ISO 20022 standards and practices, as well as industry trends and best practices.
Endava helps organisations prepare for changes like ISO 20022. We can help you build translation engines and efficient data storage and develop use cases with your stakeholders. For more resources on ISO 20022 download our e-book, ISO 20022: How to Navigate the Long Journey Ahead