ISO 20022 is coming – How banks can prepare for the new payments messaging standard

ISO 20022 is coming.

The new global messaging standard for payments systems is generally agreed to be a good thing for the banking industry – the Bank of England’s consultation on the plans showed respondents were “largely supportive”.

Indeed, as the UK’s central bank notes, ISO 20022 is designed to create a globally consistent financial messaging standard for payments – both retail and commercial, something that will help drive frictionless payments. Plus, ISO 20022 will make it easier for banks to detect fraud and tackle crime, reduce the need for them to undertake manual interventions in processes and improve data analytics that can enhance customer service.

However, as with a move to any new standard, there is no guarantee the transition will be smooth sailing. Yes, the migration deadline is estimated to be 2025. But the Bank of England’s deadline for banks and financial institutions to send and receive ISO 20022 payment messages is June 2022, a mere matter of months away.

If banks do not meet this deadline, and it is not pushed back, they could be in breach of regulation and at risk of non-compliance.

Fortunately, there is something banks can do to prepare for the change and even use it as an opportunity to improve customer experience, drive loyalty and fight back against strong competition. There is plenty of pressure from consumers and corporates wanting both a more frictionless experience but also better rates and fees for all payment types especially international. With information on attractive offers from competitors readily available online or via your (potential next) business relationship manager, banks have to think one step ahead or risk losing valuable business.

The best thing banks can do to future-proof operations is to make sure they have appropriate and robust technology with the right supporting organisation and team set up. Both are vital to enable them to effectively implement this new global messaging standard in a limited window.

At the moment, many high street banks are having to deal with clunky, decades-old software and disjointed business systems, making it hard to resolve payment exceptions. For corporate banks, this becomes more complex with larger size, often international transactions. What’s more, the data banks use to resolve payment exceptions is often sent via email or other unstructured formats which make it even more challenging. As a result, payment exception resolution usually relies on a human being available to manually process data, which can slow down transactions and even open the door to errors and delays. And then there’s the customer angle of wanting instant information and transparency on what is happening with their payment. This costs the bank money and can lead to dissatisfied customers.

If banks invested in scalable, end-to-end, ISO 20022-compliant case management systems for payment exceptions, they would be in a far better position. There is software available that quickly and easily integrates with legacy systems for real-time data access and use, without the need to write new code. That would mean financial organisations would be able to carry out faster and more accurate payment investigations in the present, as well as get on the right track to transition to ISO 20022 by the first major deadline in June.

Modern software can allow banks to adopt ISO 20022 messages into workflows. This means that banks would be able to automate data processing on payments without disrupting workflow. Analytics can automatically process incoming messages and send outbound correspondence and case types can be automatically identified and entered to save time and money. This also means banks can free up employee time to focus on more complex tasks.

In addition, automatically generated reports can capture every activity in investigation lifecycles with time stamps for clear compliance. And, because the data can be accessed by one central hub, banks can make it easy for clients to be kept in the loop with the latest updates on their case, boosting satisfaction and reducing inbound queries which put pressure on service agents.

There isn’t long for banks to get ready for ISO 20022. But with the right software and supporting organisation set-up, payment service providers can ease the transition, all while simplifying data processing, automating work to save time and money, reducing errors, and even optimising the customer experience to drive profitability.