ISO 20022 messaging standard: Triggering the future of electronic data exchange

By Madhvi Mavadiya | 5 October 2015

Over the past few months, the ISO 20022 standard has been in the spotlight as it becomes increasingly essential for financial institutions and financial market infrastructures and how they maintain relationships through the exchange of electronic data. The payments industry is being reformed due to the adoption of the standard and SWIFT expects the ISO 20022 to be a common language for more and more financial communications, regardless of where the business is based. bobsguide spoke to Patrick Neutjens, ISO 20022 programme director at SWIFT, about how this messaging standard has affected different countries, whether it works well with other regulations and if any updates will be revealed at this year’s Sibos.

Neutjens explained how the standard has been in circulation for around ten years and was originally created for flexible and consistent international messaging that can easily evolve to meet business requirements. “It’s taken almost ten years for stronger adoption and the reason why we’re really paying attention to this now is because it’s really picking up all over the financial market infrastructures world and in the corporate space,” Neutjens mentioned. At present, more and more countries are deciding that ISO 20022 messages are the right ones to use as part of real time payment infrastructures and people are looking to set up a global market place to facilitate this.

The FIN messaging service enables over 8,300 financial institutions in more than 200 countries to exchange financial data securely and was originally created to replace telex and fax. Neutjens explained that this service “created an environment where banks could automatically exchange messages related to financial transactions between each other and could be interpreted by computers.” Alongside the FIN standard, the ISO 20022 standard has grown in popularity recently because of the lack of constraints involved when implementing it.

Four months ago, it was announced that the Payments Council has reached an international agreement for real time payments to use the ISO 20022 standard. Over 40 financial institutions, international clearing houses and payments associations from around the world met in London to discuss the standard and attempted to reach a comprehensive decision. “As no two organisations are the same, SWIFT recognises that there is “no one-size-fits-all” approach to the implementation of ISO 20022. However, given the extent of ISO 20022 global adoption, it is likely that other communities have undertaken similar implementations within similar domains,” SWIFT says.

Neutjens commented on this London meeting and highlighted that what SWIFT are trying to ensure that adoption is consistent and maintain a harmonised framework. He mentioned that the first step was for the financial industry to realise that there is an increased number of real time initiatives emerging, which was triggered by the innovative and rapidly expanding UK payments industry.

When asked about whether the standard and other regulatory requirements like those found in the SEPA region can work well together, Neutjens revealed that a lot of international banks and corporates have implemented ISO 20022 messaging as a result of the adoption of the SEPA regulation and the specific  requirements that come with it. “What we’re seeing now because of SEPA, regulatory requirements and compliance needs is that people need to renew legacy platforms and this is the trigger which has encouraged them to adopt the standard as the messaging dimension in their infrastructure,” Neutjens said. 

What we’re trying to do is to harmonise things a bit for the increasing adoption because there is a growing need for discipline, structure and for a framework that allows financial market infrastructures to do things consistently whether they’re in Dubai or whether they’re in Jakarta,” Neutjens said as references were made during the interview about SWIFT event Sibos in Singapore later this month.

During the interview, the topic of Singapore’s advancement in the fintech space was alluded to and Neutjens explored how standards like the ISO 20022 work better in regions like Asia in comparison to Europe. “It’s dangerous to give a generic answer because it has to be looked at by a case by case basis. It’s clear that the standard seems to be easier to adopt in Asia because more common financial infrastructure is being put in place and the industry there does not have a long legacy. India has been the best example over recent years where I think the financial industry has moved tremendously over the past few years because they didn’t have a burden of legacy infrastructure that they had to move away from. In Europe, you see much more legacy and it does impose constraints. The Asian financial market is younger and more dynamic therefore, more likely to take advantage of what is available so the ISO 20022 is a no brainer for them,” Neutjens comprehensively explained.

Singapore being the location for Sibos seems even more logical after Neutjens’s clarification and he states that real-time payments will be one of the key items on the agenda at the event.

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