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Raising the Standard: The Migration to ISO 20022


The advent of ISO 20022 looks set to ready the world’s payments systems for the future. Christian Westerhaus, Head of Cash Products, Cash Management, Corporate Bank, Deutsche Bank, and author of the "Ultimate guide to ISO 20022 migration", explores the opportunities and challenges ahead.

The world’s primary payment market infrastructures (PMIs) are the beating heart of the global economy. And with the financial world increasingly looking to embrace automation, market integration and real-time services, these infrastructures are undergoing a five-year transformation to keep pace.

The transformation is being driven by the widespread implementation of ISO 20022, SWIFT’s new global standard for payments messaging, among the world’s leading central banks, including the Eurosystem, the US Federal Reserve and the Bank of England. As a result, a similar implementation is necessary for all banks wishing to retain access to central bank money. The move represents a sweeping change requiring sizeable infrastructure upgrades for banks, PMIs and corporates. It promises not only to bring payments systems up to speed with modern expectations, but also to give them the flexibility to adapt to any incoming developments.

Stakeholders stand to save time, cost and administrative effort – all while simplifying compliance checks and due diligence. But to ensure the full range of benefits can be met, it is important that corporates and their banks are on the same page.

ISO 20022: a higher standard

Already, participants are stepping up to the plate. Currently, the ISO 20022 standard has been rolled out in instant payments systems in Australia, Canada, the US and Singapore, while China, Japan and Switzerland have all implemented it for their high-value payments systems. It will soon be time for participant banks in Europe, the US and the UK to plan a smooth transition for their high-value payment systems as well.

So what differentiates ISO 20022? Compared with other formats, the data processed through the new standard is richer, and more structured – increasing the transparency of payments. This, in turn, will enable financial institutions to consistently meet their regulatory obligations, ensuring all payments are processed securely.

The move will also enable banks to improve their services for corporate clients. The provision of rich payment data, for instance, will facilitate straight-through processing (STP) for reconciliation, which is a current corporate pain point. But what steps should corporates take themselves?

ISO 20022: stick or twist?

Corporate clients are already well acquainted with ISO formats and are regularly using them for payment instructions, cash management and account information. And due to the versioning approach used by ISO 20022, these older formats will continue to be supported thus making it possible for corporates to retain their current set-up.

So why make the change? Though the status quo will enable corporates to continue to facilitate simple standardised payment flows, it will lock them out of the array of benefits made possible by the value-chain-wide implementation of the new standard. Corporates which continue to use their old systems, for example, will not have access to the specific reference numbers being introduced by SWIFT gpi.

Beyond this, migrating to ISO 20022 offers further opportunities. The introduction of standardised formats and processes, for instance, will make the onboarding of new vendors far more flexible for businesses. What’s more, the interoperability provided by ISO 20022 will facilitate end-to-end automation across a company‘s banking ecosystem – including invoicing, liquidity management, exception handling, and reconciliation.

Planning for the transition

When considering the migration to ISO 20022 it is important to acknowledge the scale and scope of the project ahead. Not since the introduction of the euro 20 years ago has the payment industry seen a comparable development. Though the transition is a number of years away, it is critical that the dialogue begin now. To meet the challenge, banks, corporates and financial stakeholders must fully commit – allocating sufficient budgets, resources and project teams to bring their operations up to this higher standard.


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Christian Westerhaus
Head of Cash Products, Cash Management, Corporate Bank, Deutsche Bank