ISO 20022’s rich data is at the heart of achieving the industry’s ambition for instant and frictionless payments. And it opens big benefits for firms that embrace the opportunity.
Nicolas Stuckens, Head of ISO 20022 Adoption and Data Quality at Swift, discusses the 5 key reasons you should adopt the new standard today.
ISO 20022 adoption marks a giant leap forward in the evolution of global payments. Its rich, structured data ushers in a new era of automation and interoperability leading to increased efficiency, innovation, and customer insights.
The journey has just begun but the future looks bright for financial institutions and their customers. Speaking at Sibos 2023, Jeremy McDougall, Director of Payments at EY stressed, “A phrase I’ve heard a lot recently is that ‘data is the new oil,’ and like oil, for data to be valuable it must be refined. Financial institutions have access to a lot of payments information, but its current presentation is not fit for purpose. ISO 20022 provides the framework for data to be presented in a structured way. Those that find the right formula for ‘refining’ the data will be the winners.”
So, what are the benefits of adopting ISO 20022? Here are the top 5 as highlighted by experts at Sibos.
1. Streamline financial crime compliance
When screening for sanctions, ISO 20022 adoption has already started helping leading financial institutions reduce false positives and it’s predicted this could be as high as 25-30% once the new standard is widely adopted. This is due to the certainty that the fully structured format provides along with clear identification and descriptions of information in each message.
“ISO 20022 is the industry’s response to an important issue, but it takes a community to deliver it. Take, for instance, anti-financial crime compliance due diligence on a transaction. ISO 20022 is all about standards, richness, and structure which helps us avoid false positives when, for instance, sanctions screening,” Paula Roels, Head of Swift & Market Infrastructures at Deutsche Bank said.
“We already managed to decrease investigations on false positives because the correct usage of ISO 20022 provides transparency and allows us to understand the underlying relationship between all parties in the payment chain. This is only one sample, but ISO 20022 provides a myriad of wider benefits when it comes to removing friction and ensuring efficiency in the system,” Roels explained.
2. Enhance customer insights
Cathy Newcombe, Senior Manager Swift Business Management, at the Commonwealth Bank of Australia, discussed the exciting outcomes for customers of the ability to interrogate customer data quickly and easily.
“It’s such a simple thing,” Newcombe said. “But once you understand purpose codes and the insights they offer, you can really tailor the experience of each customer or customer segment. For example, with ISO 20022 adoption we will be able to isolate all of our student customers, out of millions, with one query and to a very high confidence level, unlike today where a query returns 16,000 potential keywords.
“Some government benefits for concessions or rebates, are very complex to process. It means millions of dollars get left on the table each year. Since 2019, our customers have recovered over a billion dollars in benefits through our Benefits Finder.
Our ability to interrogate ISO 20022’s rich and structured data will streamline identifying these customers. It will revolutionise how we understand customer needs and enhance our service offerings.”
3. Improve payments exceptions and investigations
A big talking point was how ISO 20022 adoption can reduce the time and talent spent on investigations by sorting up to 84% of messages automatically. Dougal Middleton, Vice President, Enterprise Payments at Scotiabank said, “We’re challenged as an industry to remove friction. Friction creates cost burdens. Often this cost burden manifests itself in operations teams, especially when you have armies of people investigating payments manually. Reducing these friction points and exceptions streamlines the client experience.”
As Paula Roels also pointed out, in exceptions and investigations, while the structured ISO 20022 data will create efficiencies in individual financial institutions, it also has a tremendous role to play in creating structure and efficiencies across the whole payments industry.
“Because ISO 20022 messages come with a very structured data element and a rulebook, which will identify every single investigations use case,” she said, “it will standardise processes across our entire payments universe. This will allow us to focus on full automation, traceability, and transparency on the lifecycle of the whole case.”
4. Strengthen corporate treasury activities
Ross Jones, Head of Payments, at Barclays Global Transaction Banking, also highlighted how ISO 20022’s enhanced data element improves reconciliation. “This means from a corporate treasurer's perspective, especially a large corporate and multinational with complex businesses, complex payment corridors, and operating in some challenging markets, they are able to reconcile their payments much more quickly.
“With instant and accurate information on their real-time liquidity positions, corporates can automate models and tools to make better-informed, instantaneous decisions on an intra-day basis.”
Jones added, “What does this mean for customers? While no customer explicitly asks for ISO 20022 by name, they do demand reduced friction, enhanced straight-through processing (STP), and better reconciliation. These advancements in banking infrastructure are not just about compliance or back-end efficiency. They are crucial enablers that allow customers to streamline their operations and focus on what they do best.”
5. Offer new value propositions
Financial institutions are always looking for ways to grow their existing market share by introducing new products, capabilities, or reimagining ways that ISO 20022 payment data could be used.
As Cathy Newcombe said, “One of the possible insights comes from the ability to combine and interrogate both, underlying bank and payments data, giving financial institutions the ability to ask, what else can we do to help this customer?”
Ross Jones elaborated on possible use cases newly available because of the richer and more structured data available. “One thing it allows us to do is to prioritise payments. ISO and the purpose payments code are great enablers of this. So, think about, for instance, government welfare payments, child credit payments, pension payments, and salary payments.
“The added level of data will allow us to prioritise which are the most important payments to send first. As a banking community, we could advocate for the use of these globally and work with customers to meet their needs. This has a strong social responsibility element to it.”
Global adoption of ISO 20022 is the future of payments
“ISO 20022 is more than a standard,” Dougal Middleton said when speaking about the strategic role of ISO 20022 in the bank’s modernisation journey.
“It’s a fundamental building block of our payment ecosystem and infrastructure. Structured data now underpins everything we’re doing, whether domestic or cross-border, to achieve better reconciliation, better service offerings, and more efficiency for our customers,” Middleton continued.
The global migration to ISO 20022 is more than simply a regulatory compliance step. It's a strategic move by the whole community towards a more integrated, efficient, and customer-centric payments ecosystem. And the future looks bright.
Supercharge your payments business with ISO 20022
Leading financial institutions share insights on the concrete benefits opened up by ISO 20022’s rich, structured data capabilities.
