It is not news and has been on the horizon for almost 20 years – a build-up viewed with equal parts apprehension and excitement. Simply put, the ISO 20022 standard introduces rich messaging formatting options, resulting in faster payment processing and reduced manual interventions. Embracing change, tackling the migration head on, and looking beyond minimum compliance to opportunities which may arise, will set apart the leaders from the laggards.
Early adoption allows a longer period to “get things right”
The go live for the Eurozone is March 2023; a date which marks the start of a three-year period of coexistence. Some market players have opted to keep their ISO 15022 format in the near future, while others are taking a big bang approach. Defi Kimenga, Head of Banking Unit at Clearstream, shares that the firm is taking a phased approach by acting now, but in a considered fashion using a “longer proving ground to finetune systems and educate internal and end clients”.
An approach like this can minimize disruption and operational risk. Laurent Moscetti, EY Luxembourg Partner and Consulting Leader says: “Defining a target approach is about continuity. Ongoing governance and post-implementation support will be key to program success.” Players who prepare for a multi-year effort will also benefit from full payments stack reviews and adequate testing, according to Ramkumar Prabhu Ramachandran, Senior Manager dedicated to ISO 20022 at EY.
Why the standard matters more now than it did 20 years ago to the industry…
New technologies have sparked great innovation in banking, but this has ultimately led to market fragmentation. Clearstream’s Product Manager for Banking Services, Catherine Falcone, expects harmonization, with capabilities becoming streamlined and requiring less adaptation, if market players avoid adapting the standard to their own taste.
… and to Clearstream
The standard will make it possible to increase account-to-account solutions and straight-through processing, which to clients may materialize as direct and instant payments, says Defi. For Ondrej Vladyka, Head of Cash Processing at Clearstream, it is all about process effectivity and ultimately client outcomes. The standard enables enhanced processing of complex business rules as well as faster query turnarounds. All this boils down to a reduction in human interventions on free format messages and in testing. For customers this means more secure processing, fewer errors and frictions with financial service providers. For Clearstream this means product agility and faster time to market.
How to prepare to migrate
ISO 20022 impacts business as much as it does IT, and even then the IT migration impact will go “beyond core payments processing, with touchpoints on liquidity management, Nostro reconciliations, AML and other ancillary systems,” says Ramkumar. Assessing business, operational and technical readiness is a pre-requisite. Another key consideration is the ability to test end-to-end. A comprehensive testing strategy is crucial.
What lies beyond migration?
One of the most exciting elements is the opportunity for growth that the new standard will enable. According to Francesco Palmitessa, who heads up Clearstream’s Connectivity Sales & Onboarding, the new standard may create “room to scale, making it easier to develop tools with API capabilities, create end-to-end harmonization across companies in real time and efficient data analytics”. For Laurent, it is the ability to support EY’s clients in navigating the migration so that they can emerge ready to grasp growth opportunities, that he looks forward to the most.