Why ISO modernization is so important for financial institutions
The transition to the ISO 20022 financial messaging standard represents a step toward a global standard for payment messaging. Financial institutions will greatly benefit from SWIFT’s implementation of ISO 20022, which will allow for cross-border payments starting in August 2022. (FIs). However, the road to adoption for these organisations may be rather difficult. FIs will require a comprehensive solution for ISO 20022 message translation between legacy message formats in order to successfully implement the new standard.
Opportunities for adopting ISO 20022
This change presents a fantastic chance to improve the way payments work. We must use this chance to lower fraud, improve compliance, and create a better, more reliable payment infrastructure in a world of immediate payments and rising payment fraud in the digital payments sector.
The solution must be future-proof for modifications to ISO 20022 as they come up because the standard, and the acceptance of it, are continually evolving. It will be simple to adopt new requirements as they are announced with an ISO-native solution. Instead of using separate business processes to invoice, receive a payment, and then reconcile that payment, companies will have the opportunity to incorporate payments into their whole order-to-pay business operations. From beginning to end, the process is made simpler by the integration.
More data can be included in messages that conform to ISO than in those that do not. FIs can achieve a higher level of protection against financial crime, AML, and sanctions by utilising this additional data. Through quicker cash application, businesses may better manage cash and liquidity risk, and both corporations and FIs can forecast cash flows.
FIs may do data analytics more quickly and use payment stream data to give business insight not previously available in other payment streams because to better access to standardised data sets.
The creation of an ISO API-enabled Transformation layer aids FIs in developing a business plan that precisely identifies the unique experiences and goods the company provides. Additionally, FIs can link to their ecosystems to provide their unique experiences and products by continuing to work on the ISO APIs.
An FI can convert the messages from its legacy payment system into an ISO 20022-specific message format for the downstream system using an API transformation layer solution based on ISO 20022 messages. To bridge the gap until their systems have native ISO 20022 capabilities, this is practically a must for many FIs. It will take some time to get acclimated to ISO 20022, as legacy proprietary formats like SWIFT MT are already well-known and widely utilised in the industry. A few years of coexistence between legacy and ISO standards could be strategically allowed. However, it’s crucial to give end users an interface that presents original and converted messages in a clear and unmistakable manner while also offering functions that let users appreciate the value of ISO’s extensive message fields.
Reduce IT complexity, promote agility, enable partners, connect smoothly, and adhere to regulatory standards are just a few goals that ISO 20022 adoption should achieve. These goals might sound familiar to you because they apply to the majority of FI IT systems in general. However, they become much more crucial when giving priority to ISO 20022-enabled systems.
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