ISO 20022 just one of the key steps towards cross-border payments interoperability

Future cross-border payment infrastructure will have to pass data privacy, local benefits tests

by | October 12, 2021 | bobsguide

SWIFT’s rollout of ISO 20022 in November next year is seen as a major milestone for the modernisation of cross-border payments. However, it is one step of several needed to create cross-border interoperability, said Charlotte Hogg, CEO of Visa Europe.

“One shouldn’t assume that you’ve solved every interoperability [problem] just because you’ve got one standard,” Hogg said at the Sibos conference on Monday.

Michael Gorriz, chief information officer at Standard Chartered, agreed “ISO is a huge step forward. But […] it’s not the only solution to the problem.”

“It’s an important ingredient, and we are fully embarking on it and driving it within our network.”

He added, however, that there have already been real tangible improvements to payments where ISO 20022 has already been rolled out.

“What ISO has helped us to do is increase our zero-touch rate because we upfront get better quality of data. Moreover, in the compliance work that has to be done in international payments, the quality requirements to initiate the payment are higher, [so] you get much more specific data with ISO and that’s a big enabler for speed and for cost.”

One of the goals of ISO 20022 implementation is to reduce the number of manual interventions corporates need to make by attaching more information to the payment itself.

“The ISO standard is sort of an acknowledgment of a problem that’s been going on for multiple decades,” said Ather Williams, executive VP at Wells Fargo. “Why is it that my payment comes in here and information about what I got paid for comes in somewhere else?” By attaching richer data to the payment itself, corporates will more easily be able to reconcile their cross-border transactions.

Future proofing

Given the increased interest in creating faster and more affordable cross-border payment infrastructure, there has been a lot of innovation within the space, ranging from traditional payment providers like SWIFT to fintechs utilising blockchain and distributed ledger technology (DLT).

Gorriz said that keeping an open mind on the different approaches is key right now.

“We are pretty much participating in all of these initiatives in order just to be active, and to find out where the market will focus on and what will be the winning scheme,” he said.

One thing market participants will need to keep in mind as the market continues to innovate and the availability of data grows is data privacy.

“We’ve seen over the last couple years [that] various regulatory regimes take a different stance on data privacy,” said Williams.

“It is really an open debate, which I think is something that the industry needs to embrace, to keep things fair.”

Hogg agreed and emphasised that financial institutions need to prove that global institutions and agreements can serve the local good.

“The global infrastructure that we build, the tools that use global data to protect against fraud, need to deliver day in day out to [everyday people] and therefore have a local benefit by being global.

“There’s an expectation that you have to take the global assets and deliver them in a tailored and important way locally. We cannot just assume global is good.”

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