By David O’Mahony, Business Analyst, AusPayNet
On Monday, 20 March 2023, more than 11,000 institutions in over 200 countries and territories, their vendors and technology teams, and many domestic payments platforms will start their migration to ISO 20022 for payments and related messaging. This will be one of the largest migrations ever undertaken by financial institutions and represents a once-in-a-generation change.
Here in Australia, 50 participants will migrate the domestic real-time gross settlement system to ISO 20022. Preparation for this event has been underway for the last three years, with AusPayNet leading the industry migration project.
But this work is just the start of the journey. The scale of the change is so significant that there will be a co-existence period between the old ISO 15022 standard and the new ISO 20022 standard for those using Swift, with the expectation that ISO 15022 will be phased out by November 2024 for domestic payments, and by November 2025 for cross-border payments.
In a nutshell, fully adopting ISO 20022 will mean greater interoperability between payment networks and platforms, and that cross-border transactions between financial institutions will become faster, cheaper and more transparent. The enriched data in ISO 20022 will enable financial institutions to better support their customers through value-added services.
So, why is such a momentous change necessary? A key challenge for the payments industry is the proliferation of payment formats and standards, meaning payment networks and systems do not integrate well with each other. This introduces friction, which slows down payments and adds to their cost.
ISO 20022 payment messages can carry much richer, enhanced, and structured data, such as structured remittance information and structured name and address information that identifies the parties in the payment chain. Unambiguous identification of names and addresses will help meet the regulatory requirement to screen payment instructions (i.e. Anti-Money Laundering/Counter-Terrorism Financing/Sanctions Screening obligations) more efficiently, which will lead to faster and cheaper payment processing.
Through implementation of ISO 20022 globally, interoperability can also be achieved between payment systems and networks. By speaking the same language, overheads associated with translation and conversion can be removed. Payments will travel more easily between payment networks around the globe, increasing reach and overcoming the fragmentation found between systems and networks based on different formats. It also future proofs payments so that new payments technologies in development can efficiently connect.
For customers, this will ultimately deliver faster, cheaper, transparent and accessible payments as financial institutions will be able to create seamless experiences for customers. This also supports the aims of the G20 Leaders, who have supported an ambitious program of work to enhance cross-border payments, including their speed, cost, transparency and access.
To all those who have worked tirelessly over the last few years on the migration to ISO 20022, AusPayNet wishes you a seamless migration next week.