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EY teams can help you understand the benefits and challenges of leveraging the ISO 20022 data standard across your organization. Find out how.
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European Central Bank (ECB), and the start of Swift’s ISO 20022 cross-border payments and reporting (CBPR+) migration period in March 2023. While members institutions have met requirements for migration, the focus has been on implementing minimal changes that enable like-for-like translation vs. strategic planning for enhanced ISO 20022 data in the back office. With Clearing House Interbank Payment System (CHIPS), Federal Reserve, and Swift deadlines coming throughout 2024 and 2025, institutions should not only work toward basic compliance, but consider how to strategically position themselves to achieve the intended benefits of ISO 20022 migration for their clients, their shareholders and the greater financial community.
When the CBPR+ coexistence period began in March 2023, 15% of payments instructions were initiated in ISO 20022. As of November 2023, the adoption rate has only increased to 18%. This has not met the industry’s expected pace, raising concerns about the readiness of the financial industry for 2025 requirements. While the majority of banks are doing the minimum to comply with the standard, leading banks are forging their own path by using ISO 20022 natively in their back office and planning to leverage enriched data fields offered by the standard. This disparity in adoption approaches will create increased risk of interoperability issues and operational disadvantages in the competitive landscape. It also raises concerns that the wider adoption needed to achieve the full benefits of ISO 200221 will not come to fruition.
In this article, we worked with J.P. Morgan Chase (JPMC) to delve into the current state of ISO 20022 migration, exploring the challenges and lessons learned on the ISO journey to adoption and recommending how institutions can take actionable steps to start accelerating their strategic adoption journeys and narrowing the competitive divide.
Industry observations: challenges in ISO 20022 migration
Many financial institutions have taken a tactical approach focused on minimal compliance, rather than a long-term strategic approach focused on moving toward an ISO 20022 native back office to enable enriched data fields within the migration roadmap. Institutions focusing on minimal compliance have experienced challenges delivering against multiple migration deadlines, struggling to block out enough time for testing and running out of funding after one migration, only to have to request additional budget for upcoming 2024/2025 migration requirements. Quickly approaching deadlines between now and 2025 will only continue to exacerbate resource and time pressures for institutions.
Many financial institutions initially assumed that migration would be a quick “technical” exercise, but are now overwhelmed by the complexity and scale of the effort. Smaller institutions relied on their correspondent banking relationships and vendors instead of owning the migration efforts in-house. These institutions are now realizing that there are still significant internal requirements to get ready for the ISO 20022 cutover, including aligning systems downstream of payments applications and training operations and technical teams on the standard. Training is particularly critical, as a lack of education, both internally and with customers, has hindered the understanding of the adoption process and its strategic benefits. Jesús De Lara, ISO Head of Business Readiness & Commercialization for JPMC, notes that “our ISO 20022 Global Program has a workstream dedicated to business readiness and commercialization, which continuously provides materials to all JPMC’s Sales, Operations and Client Service teams, including a detailed list of frequently asked questions. This working group also has numerous resources² available to all clients that holds all ISO 20022-related information, including a recent eBook titled, ISO 20022: First 120 days live³, which provides insights into our lessons learned and aims to help others financial institutions to adopt ISO 20022 standards.”