A key theme of this year’s Sibos in Sydney, Australia, ISO 20022 had its own track dedicated to it.
The messaging standard has been hailed a “global success” by SWIFT, with ISO 20022 expected to support 80% of high value payments and 89% of the value of transactions worldwide in the next five years (completed by 2026), with the standard including richer data on party and remittance information than the standards, MT or Fedwire.
However, that migratory period will not go without its problems. Chief among them is compliance for banks, according to head of standards at SWIFT, Stephen Lindsay.
“It creates a big concern around compliance for banks,” said Lindsay, who was speaking on the sidelines of the conference. “They certainly can’t be dropping party information out of messages when they’re going cross-border. Staying on the MT standard creates that disconnect in international payments.
“You potentially have messages coming out of a high value payment system - an average of 50% are likely to have a cross-border leg - so you need a way of replicating the data through the whole chain,” said Lindsay, stating that ISO 20022 adoption sooner rather than later is the best course of action.
“This scenario also creates further problems in terms of customer service; if the payment chain is initiated in data rich ISO 20022 you want the beneficiary to receive all the data. That leads to a fairly clear requirement for ISO 20022.”
The consultation on the Swift customer study suggests an appetite for ISO 20022 migration sooner rather than later with 87% of all respondents agreeing that migration to ISO 20022 is justified.
“We had an overwhelming response to migrate to ISO 20022. It’s not simple to migrate 10,000 banks on the SWIFT network,” said Lindsay.
“Any instant payment scheme will be using ISO 20022, the Australian NPP, Singapore and Denmark, while the new payments architecture (NPA) of the UK’s Faster Payments scheme will migrate Bacs as well as CHAPs - through the Bank of England’s RTGS - to ISO 20022 by 2021.”
Likewise, across the Eurozone, TARGET2, the MT based high value payments system for euro and the EBA’s EURO 1 are migrating to ISO 20022 with a 2021 deadline. In the US, the Federal Reserve is currently scheduled to move to ISO 20022 by 2022, and CHIPS is the same.
“Some infrastructure is already there, like the Swiss Interbank, China and BOJNET in Japan. We’re giving the community four years in which to make that migration from 2021-2025. We’ll offer tools to make sure everyone is interoperable but the end result would be that MT messaging would disappear,” said Lindsay.