Recognising concerns that many banks would struggle to accommodate ISO 20022 messages in time for its proposed migration in November 2021, SWIFT opted to amend its strategy – delaying the implementation of ISO 20022 in the correspondent banking space by a year. A wave of action from market infrastructures around the world followed, with many deciding to change their own plans.
It would be easy to use the delays as a respite, but now is not the time to ease up. The transition to ISO 20022 still requires an enormous amount of external and internal coordination – and project work should reflect this.
A new direction
At the core of SWIFT’s new strategy is the development and introduction of a central transaction management platform. By holding a copy of the complete payment data – accessible by each bank in the chain – the platform will allow rich data to be exchanged from end-to-end. This will unlock new services, streamline processes and provide various compliance benefits, while reducing the cost and complexity of ISO 20022.
In July 2020, in response to SWIFT’s decision and also the added pressure on long-term project work exerted by the pandemic, the European Central Bank (ECB) announced that it would delay its T2-T2S (TARGET2-TARGET2-Securities) consolidation project to November 2022. Soon after, private-sector market infrastructure provider EBA CLEARING confirmed it would align its EURO 1 migration with SWIFT and the ECB.
After receiving feedback from the community, the Bank of England (BoE) has opted to initially go live with like-for-like ISO 20022 messages only in June 2022, which will prevent enhanced data being sent via CHAPS. The BoE then plans to introduce fully enhanced messages in early 2023.
Over in the US, the Federal Reserve Banks have confirmed that their preference is for a “big bang” rather than a phased approach, although further details are not expected before 2021.
The delays by SWIFT and various market infrastructures have also revealed several potential problems. For example, under the revised timelines some payment systems are now scheduled to migrate before SWIFT’s new platform becomes available. As a result, participants will be able to receive payment messages from customers and correspondents in the ISO 20022 format, which may then need forwarding across a payment system that has yet to migrate, and vice versa. This reason influenced the BoE’s new approach to initially go live with like-for-like ISO 20022 messages, which allows them to avoid such interoperability issues.
That said, the BoE’s new approach has created other knock-on effects. Under previous plans, the ECB was slated to migrate before the BoE. That order has now switched, with the BoE scheduled to make its transition five months earlier. When originally preparing for the deployment of T2 and CHAPS, some banks had planned to leverage their T2 build for their CHAPS migration – a strategy that will now have to be reconsidered.
In addition, the revised strategies mean that preparation for T2 User Testing will run in parallel to the BoE´s migration, while the Eurosystem’s go-live date will coincide with the SWIFT migration. With the timelines so congested there are concerns that some banks will struggle to deliver.
Despite the recent delays, the global migration to ISO 20022 is going ahead. Greater payment processing efficiency, improved customer experience and streamlined compliance procedures are expected, but to reach them will require continued work from banks on their internal projects. This includes preparing schedules, securing resources, allocating budgets and ensuring that everyone affected by the transition is up to speed with the latest developments.