ISO 20022: What does it mean for financial institution?
ISO 20022 is a universal financial industry messaging standard that has been globally adopted by many financial institutions. It defines a common platform for the development of messages and business processes that can be used for various financial transactions and major global payment systems, such as SWIFT, T2, SEPA and Fedwire.
The new standard will replace the legacy MT messaging with MX XML-based messages, although both will coexist until November 2025. The new message standard will provide:
- Improved data quality between parties involved.
- Increased automation to facilitate enhanced straight-through-processing.
- Cost reduction, driven by improved accuracy and efficiency.
- Enhanced compliance bolstered by digital adherence and safety, streamlining regulatory reporting, anti-money laundering and sanction checks.
With the decommissioning of MT messages after November 2025, it is essential for banks to ensure they are ISO 20022 compliant and utilize the benefits and competitiveness of this standard within the financial industry.
What you should know
The implementation of the ISO 20022 payment protocol signifies a transformative change in the banking sector, and financial institutions may face operational hurdles during the transition. These difficulties originate from a variety of elements:
- Technical challenges, such as migration mapping, legacy systems, new data fields, architecture, and interface changes.
- Data retention and data quality.
- Business challenges, such as upskilling of resources, defining a migration/co-existence strategy.
- Structured address, sourcing, and consistency in legacy systems, billing, and invoices.
- Timelines, to plan and manage adoption and any regional requirements.
Considering the scale and impact of this transformative change, careful planning and execution will be crucial to ensure a smooth transition.
How can Loan IQ help you with the transition?
Although Loan IQ is not a payments engine, it does provide the data fields associated to a payment transaction, allowing banks to utilize it as part of their interfaces enabling settlements.
As we have seen many clients push the reliance of ISO 20022 requirements onto their payment’s engines, using MT/MX translation intermediary solutions, the demand on Loan IQ has been limited. That said, by enriching the data fields/structures within Loan IQ we are looking to help banks mitigate some of the potential issues faced during this ongoing transition.
Should you have any questions or require any further details, please reach out to your Account Manager.
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