As an international messaging standard for corporates, capital markets, and financial institutions, ISO 20022 represents a seismic effect on financial messaging. The finance industry is translating conventional cross-border payments messaging structure to the new ISO 20022 format. In fact, SWIFT (Society for Worldwide Interbank Financial Telecommunications) has predicted that by 2025, 80% of high-value payments and 89% of the value of transactions worldwide will adopt the new big bang ”ISO 20022”. So let’s talk about ISO 20022 migration.

Challenges of ISO 20022 Migration

What is ISO 20022 Migration?

ISO 20022 migration provides a more robust and data-rich message standard advancing payments, reconciliation, and treasury management standards, All thanks to advance reconciliation and treasury management standards, financial messages will be robust and data-rich which will eventually deliver the granular details and structure of information that permits banks to optimize cross-border payments.

What’s more? Quality data results in quality payments. This means fewer false positives, effective risk management tools, reduced human intervention and costs incurred, and drive 100% straight-through processing (STP) rates. Isn’t it amazing?

In regards to a Case Study conducted by ECS Fin, BankMedical offers commercial and private banking services to corporates and individuals. One of their suppliers, asked Kapital Co, a tea distributor, to aggregate all supplier’s invoices into one single payment in order to keep doing business. This would reduce their maintenance costs and improve STP rates.

However, BankMedical is currently receiving unstructured strings of data from its clients. It was becoming quite cumbersome for the bank as well as for the company to identify the originator and beneficiary. Moreover, banks find it difficult to address the validation of information to match it against sanctions and anti-money laundering screening lists.

  • ISO 20022 based instructions

With ISO 20022 based instructions, banks and corporates now will be able to revamp all legacy-styled systems towards a future-oriented paradigm of digital payments to deliver the best quality of services to their clients with agility and speed. Adoption of ISO 20022 will also provide a way for banks and corporates to fight against their competitors.

This new messaging standard will help to send rich and structure data that were never ever designed to carry out the high-quality data. Though it is quite evident that ISO 20022 will bring unquestionable benefits for the financial industry, it will be a quest for banks to incorporate substantial efforts and resources to integrate deep roots of this new standard. With the interaction of multiple business lines and systems, banks and entrepreneurs need to adopt and comply with the broad reach of payments set by the ISO 20022 standards.

What are the Challenges?

ISO 20022 migration strategies, deadlines, rulebooks, and payment market infrastructures need to be thoroughly read by the corporates as well as financial institutions in order to produce transparency and efficiency to complete a transaction.

Before migration of ISO 20022, organizations, and banking institutions need to be well-equipped with the transitional period. Let’s break down challenges that banks could face while migrating to ISO 20022:

  • Coexistence Challenges

There is no denying the fact that every financial institution and business entity is advised to comply with every deadline and new development – not just that of its own jurisdiction, but globally to make the financial messaging standard secure, transparent, and effective. However, abiding by all the rules and regulations of different jurisdictions could present challenges for all parties worldwide.

The primary challenge is the consequences of the coexistence of both ISO 20022 message standards and legacy systems. However, the new era of payment demands for new ISO standard to experience error-free, and human-free intervention transactions. It is advised to begin the migration process early to make the transactional process error-free.

  •  Data Handling

Complying with ISO 20022 migration means that there will be more more databases, warehouses, and systems to process large volumes of data, with faster speed to ensure STP. It’s critical to ensure data flows efficiently for intraday liquidity management, fraud prevention, and compliance checks. Infrastructure and operational requirements need to be met to deliver high-quality services for your clients.

  • Intense Pressure to Comply with Guidelines

Banks are affected by ISO 20022 migration and must be ready to handle the dreadful impact it will have on a corporate’s payment chains. So, how will everything be managed?

ECS fin helps banks and corporates keep their systems ready so that they can cope with the new messaging standard including truncated data, storage, performance, unique solutions, and integration.

To remain abreast in the competition, many corporates and banks have already started leveraging this new payment standard by accommodating large sets of data and supporting ISO 20022-based data models. CBPR+ group of experts are exposing guidelines mingled with a regulatory deadline so that everyone in the financial industry can be ready to digest this new recipe of payment standard.

ECS Fin suggests to begin early planning on one’s ISO 20022 implementation roadmap before it’s too late to look back.

  • Working on Data Gaps

What’s the essence of ISO 20022? ISO 20022 standards deliver comprehensive, secure, rich, and high-quality data to enable the pre-validation process and streamline end-to-end payment processing. In order to adopt the new messaging standards of ISO 20022, banks need to work on two things:

  • Cassess their own financial records to check if they require any granular details of their customers proprietary formats to pass in a structured manner via outbound messages.
  • Check the quality of their client’s information.

Omitting information or inputting data in the wrong field could negatively affect the payment. For example, in a SWIFT MX message format, addressing a building name could be incorrectly interpreted as a street or building, especially in instances where less familiar characters and languages are present. To avoid such complications, it’s critical to migrate early.

How ECS can help to implement ISO 20022 Migration?

Honestly, abiding by new rules of ISO 20022 migration has become the need of an hour to increase automation for delivering cost-effective financial products and the customer’s demand for real-time services. ECS Fin can overcome the challenges presented by ISO 20022 migration with our IMS solution.

We ensure the creation of well-structured financial messages that carry extensive remittance data. Being a global provider of financial payment solutions, ECS Fin will become your translator that addresses the complex challenges of ISO 20022 migration programs with minimal impacts on existing systems.

Begin your financial journey with ECS, who will help you maintain your market leadership today and in the future. Just shred your worries, and let us help you with the entire ISO 20022 migration lifecycle, from comprehending multi formats, deadlines, standards compliance through to modernized payments.

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