To stay relevant in the correspondent banking business you need to migrate cross border payments to ISO 20022 by November 2021. This deadline has appeared faster than expected, leaving many financial institutions little time to evaluate implementation options. Similarly, deadlines are also fast approaching for domestic high value payment systems.
But there are still opportunities to quickly pivot and meet fast-approaching cross border migration deadlines, while also reaping business value from ISO 20022. Rather than treating this merely as a message format change, payment providers can embrace it as a catalyst to modernize, streamline and enhance back office processing. As importantly, the right strategy can mean the difference between organizational struggles to manage and store the influx of data the new format will bring, or embracing it as a competitive advantage with the help of an ISO 20022 native solution.
Here are three strategies all financial institutions that are still grappling with how to accommodate these fast-looming deadlines should consider.
A phased approach to full legacy system replacement
A partial migration that includes the necessary requirements to meet ISO 20022 deadlines followed by a full system replacement serves several important purposes:
- The institution meets requirements for ISO structured messaging, which removes the possibility for misinterpretation or lost data, eliminates manual intervention and improves straight-through processing.
- This approach can lower costs, enable efficient payment pass through, improve regulatory compliance and ease payment reconciliation by the beneficiary.
- In the longer term, the institution gains the capability to deliver value-added services for customers.
Payments as a Service (PaaS)
Replacement of outdated legacy payments system requires a commitment of time and capital. For institutions just beginning to determine how to accommodate ISO 20022, Payments as a Service (PaaS) can be a solution that ensures looming deadlines are met.
With PaaS, the financial institution’ technology partner manages payments infrastructure on its behalf, ensuring compliance with the new standardized payments format. PaaS services can also offer streamlined access to instant payments, ACH payments and open APIs; this empowers the financial institution to create new services and adapt to emerging market demands.
A stop-gap measure
Some banks not yet capable of receiving richer, standardized ISO 20022 messages may use a service like those offered by SWIFT and other vendors that translate both cross-border and domestic ISO 20022 messages to MT. However, all financial institutions should be aware that this is a short-term solution with inherent risks. For example, data can be truncated or dropped altogether in transit, presenting serious compliance issues. In fact, it’s not suitable for correspondent banks at all.
November 2021 deadlines are fast approaching, but there’s still time to act. With the right ISO 20022 adoption strategy, your financial institution could evolve into a more cost-effective, efficient and competitive business. Visit our ISO 20022 website to learn more.