ISO 20022 is poised to revolutionize the payments industry. Financial institutions around the world have already begun to feel the effects, both good and bad, and banks in the U.S. are beginning to brace for impact. ISO 20022 is coming fast…are you prepared?
What’s the Deal with ISO 20022?
In order to conduct business, financial institutions exchange vast amounts of data and information with their customers and among themselves. These exchanges work only if the sender and receiver of a message have a common understanding of how to interpret that information. As you might imagine, standards play a vital role in this process, especially over international borders. Moving payments from one bank to another on a domestic basis is something that most of us take for granted, but exchanging payments internationally is often (under the hood) extremely difficult. Payment standards in both the U.S. and internationally are fragmented and antiquated, and the lack of a common payment exchange format has reached a critical mass as commerce becomes more and more global.
The New Language of Payments
That’s where ISO 20022 comes in; it defines the ‘language’ for information exchange between financial entities. Business transactions and messages that comply with ISO 20022 can be used among any industry participants (financial and others), independently of any specific communication network. The standard allows users and developers to represent financial transactions in a formal but syntax-independent notation using XML (eXtensible Mark-up Language). The standard itself describes the development methodology, the registration process and the organization of the central financial repository that contains the ISO 20022 messages and their components. Copies of the standard can be purchased from ISO at http://www.iso.org.
Different Names, Same Standard
The first ISO 20022-related legislation of note is the Single Euro Payment Act (SEPA) in Europe. But SEPA is just the first of many standards being set for financial and business institutions around the world. Indeed, there are 70-80 different permutations being developed and they are all based upon the ISO 20022 standard. Europe has been at the epicenter, but the shock waves are spreading rapidly. The question is no longer if ISO 20022 will impact you, but when.
A number of markets are close to adopting ISO 20022, most visibly Canada, but studies show that only 9% of U.S. respondents are actively planning for ISO 20022. As more and more countries and institutions adopt related standards, U.S. banks will eventually be compelled to adopt the standard. Will you be ready? The good news is that ISO 20022 brings profound benefits to the financial services industry, especially as it works to achieve end-to-end processing across domains and geographies that currently use vastly different standards and information formats.
Want to learn more about ISO 20022 and how it might benefit your organization? One place to start is to download the Celent White Paper: ISO 20022- The Payment Revolution sponsored by IBM. The white paper helps remove some of the mystery surrounding ISO 20022 and brings to light many of the benefits and advantages to adopting the standard.
ISO 20022 Webinar June 17th
Another good step forward is to attend the Live Webinar on June 17th called The Future of Payments hosted by Gareth Lodge, Senior Analyst with Celent’s banking group. He’ll be discussing the white paper in detail and exploring the rise of ISO 20022. You’ll gain better understanding of the opportunities that it can create, and the challenges that it may pose for banks and processors.
It’s time to get moving. As you map your strategies, look for resources and partners that have the right mix of experience, capability and vision to enable you to make the most of the transition to ISO 20022.
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Guest contributor Kevin Craine is the author of the book Designing a Document Strategy, host of the Document Strategy Podcast, and a respected authority on document management and process improvement. He is the managing director of Craine Communications Group. For more information visit CraineGroup.com.