1. Global prioritization and resourcing
Banks will be required to invest heavily in their global migration to ISO 20022. Prioritizing which jurisdictions, products and services should be migrated first will create a competition for global funds and resources to manage the project. Because ISO 20022 return on investment (ROI) tends to be long term due to migration effort complexities, banks will need to evaluate their business case to determine when cost savings will take effect and strategically communicate the benefits to program sponsors.
2. Consistent interpretations of data
Aligning with partner financial institutions is required to understand and agree on a consistent interpretation of the ISO 20022 standard, especially across jurisdictions. This is important so that data standardization is achieved across multiple payment systems and an approach to data governance, quality, harmonization, migration and ownership is defined.
3. Length of time before benefits are realized
Message conversion will impact payment initiation, client information, payment channels and payment processing, and will require careful consideration and time to reflect the new standard. This lead time will require internal rework and delay the benefits related to customer journeys. Although it may take time to recognize the benefits, significant improvements to STP and newly added insights from ISO 20022 enriched data will provide notable monetization opportunities for banks.
4. Understanding operational impacts
Organizations need to factor in the impact to internal systems that do not share the same migration priorities as their core processing applications (such as those used for accounting, reconciliation and liquidity management) and that may require legacy tech to be retrofitted. To establish a seamless transition to ISO 20022, banks should focus on building interim solutions that support business continuity, while simultaneously focusing on updating legacy systems.
Key benefits to banks
ISO 20022 is often referred to solely as a compliance initiative; however, banks can seize the opportunity to migrate and bring payments innovation to their organizations. While challenges must be considered thoughtfully, migrating to ISO 20022 and setting up a common platform for payments offers banks profound enhancements in the payments ecosystem. Overall, enriched data and payments can flow consistently and transparently, driving productivity across the front and back office. Specifically:
- Greater efficiencies: ISO 20022’s enriched data-carrying capacity enables operational efficiencies and better management of transactions and customer information with global interoperability.
- Improved customer experiences: Payments are processed and settled more quickly through STP, thanks to reduced errors/failures and investigations throughout the payment lifecycle.
- Enhanced communications: By driving structured data and formalized content, ISO 20022 has well-formatted and dedicated messages for both bank-to-bank and bank-to-customer experiences. Standard message types cater to the pain and pacs formats.
- Additional customer insights: Robust data provided by ISO 20022 standards enables banks and nonbanks to better identify customer trends and provide improved services to their clients.
- Faster and more accurate compliance: The standardized messages across flows help improve fraud prevention capabilities and regulatory reporting activities.
- More opportunities for innovation: Improved infrastructure provides banks the opportunity to implement leading-class technology solutions and capitalize on operational efficiencies, resulting in faster time to market and reduced infrastructure cost.
The primary contributors for this article are Kasif Wadiwala (EY Principal, EY Banking and Payments Consulting), Andrew Lim (Senior Manager, Technology Consulting, Ernst & Young LLP), Kushali Marwaha (Manager, EY Banking and Payments Consulting, Ernst & Young LLP), Zareen Taj (Manager, EY Global Delivery Services (GDS) India LLP), and Alexis Sisko (Senior, EY Banking and Payments Consulting, Ernst & Young LLP).