ISO 20022 is the new industry buzzword. And with a reason.
Within the next five years the most important payment infrastructures in the US, Europe, UK, and the Nordics –just to name a few–will migrate towards ISO 20022. The move will dramatically impact the financial institutions active in these regions but also their customers and correspondents.
Before rushing to hire big consultancy armies to help you with the migration, you should have clear in mind how this programme fits within your wider payments strategy, how you can benefit from it, what the full scope is of it and how it impacts the way your financial institution, your customers and correspondents operate.
Listed below are nine essential tips we have put together for our clients. Check them out to learn how to avoid incurring into over-simplified and over-optimistic migration planning processes.
9 tips for a successful ISO 20022 migration programme
1) Inform yourself.
Get a tight grip of what ISO 20022 is, how and where it applies, and what the advantages and disadvantages are. We recommend reading SWIFT’s “ISO20022 for dummies” or consulting SWIFT Standards webpage. Thirdly, consider getting in some experts to run a 2-3-hour workshop to deepen that knowledge and help you understand the impact. (Not a sales-shop. A workshop!).
2) Don’t rely solely on SWIFT translation services.
Several banks are planning to rely on SWIFT translation services during the first years of ISO 20022 migration programme. If you are among them, you should know that multiple Central Banks, like the European Central Bank and the Bank of England (see CHAPS system) are planning to create specific data requirements. They will ask for information about the parties involved in the payment, the purpose of the payment, and others. Since this information is not there yet, these requirements will make the translation services void. By the way, this is exactly the kind of information those experts need to inform you about in the workshop. What are other banks doing? What are the real issues deep in the detail?
3) Define who you want to be in five years’ time.
Before starting your IS0 20022 journey, you must decide how important international payments are for you. This will heavily drive your approach to the ISO20022 migration programme. There is nothing worse than trying to compete tomorrow with today’s bank.
Some central banks, like the Bank of England and the Fed (see Fedwire), are still defining their overall approach to ISO 20022 migration. So, you need an agile approach to implementation and plans to accommodate the inevitable late changes.
5) Look beyond payments.
ISO 20022 exercise’s implications go far beyond payment systems. Additional data and data structure requirements will have a ripple effect on sanctions, fraud, AML, core banking and other systems. Only by adopting a holistic approach, banks can ensure a successful ISO 20022 migration programme. Start by thoroughly mapping out how ISO 20022 will impact the various internal departments and engage with the required stakeholders. In other words, if you just comply for compliance’s sake, when the time to compete comes, you are going to incur costs and complexity you haven’t thought through.
6) Anticipate any friction.
Unaware customers are frustrated customers. Spare them a negative experience by pro-actively inform your bank’s account holders of any new payment requirements imposed by Central Banks. Let them know what type of information they are expected to provide timely. In this way, you will ensure that your customer’s payment orders will not be–automatically or manually– rejected.
7) Use this opportunity to structure and monetise your data.
There is currently a lot of noise around data analysis and AI/ML. The reality, though, is that most banks’ data is dispersed and unstructured. ISO 20022 enables banks to store and provide information in a structured manner. This is why you should stop seeing ISO 20022 migration as another compliance programme. This is your opportunity to generate business value through data.
8) Improve your reporting to customers and regulators.
The more structured your data is, the easier it is to provide information to your customers. Clean data sets help you to understand your customer’s behaviour and your customers to reconcile incoming payments with submitted invoices. At the same time, it will be easier for you to respond to the increasing regulatory reporting demand.
9) Choose the right travelling companions
You’ve got this far. You’ve learned everything about ISO 20022; you’ve defined your vision for the next 5 years; you’ve identified dependencies and opportunities. Now it is time to find the right travelling companions. Find the right consultancy to help you with your project by scoping your needs and priorities. You don’t want a consultancy that will live on the back of a long-term project, but rather a consultancy that will get you to any destination you may decide, in time, on budget and with a great travel experience!