Allan Spalding, Industry Relations Director, Volante Technologies Inc
ISO 20022 has been around for more than a decade and for most of this time it has been viewed as an attractive and practical proposition for the creation of unified messaging standard for many areas in the financial services industry. For the payments processing landscape however, what has been missing is a compelling event to accelerate its adoption. This situation has now changed and it would seem that the compelling event to drive ISO 20022 adoption within payments has been the mandating of ISO 20022 messages for SEPA.
The push for ISO 20022 for SEPA appears to be a tipping point in both the acceleration and expansion of the adoption of ISO 20022. This expansion has happened because once a large number of firms were required to adopt ISO 20022 for a specific part of their payments business, it then became a case of finding other areas in which to reuse the same messaging logic given that much of the processing can then be shared across payment schemes.
Many of the world’s payments infrastructures, such as domestic Automated Clearing Houses (ACHs), have used highly proprietary message standards for decades. However, in recent times many ACHs and Real Time Gross Settlements (RTGS) infrastructures have migrated to ISO 20022-based messaging – or intend to migrate shortly. The continued increase in the creation of real-time or instant payments schemes around the world has also added to the growth in adoption of the ISO 20022 standard.
In the UK, Pay.UK was recently established to combine and run all UK retail payments operations. It has begun the process to build the New Payments Architecture (NPA), which will include BACS, Faster Payments (FPS) and Cheques. Pay.UK has also announced that the intention will be to migrate at least BACS and FPS to ISO 20022 from the current standards of Standard 18 and ISO8583.
Messaging standardisation is anticipated to significantly reduce the cost and risk across the entire payments lifecycle. However, this will be hard to achieve through standardisation alone. Organisations will also need to integrate the data flows amongst their payment processing systems in a real-time processing environment to fully profit from the benefits that standardisation offers. This challenge of integration between systems, however, is more than simply interpretation of messages – it also includes the need to deal with the fact that implementations of the same syntax varies given different contexts of use, e.g. which scheme is implementing them. Added to the interpretation aspect, business rules and logic needs to be in place to ensure the right context for processing is set – challenging, when you consider the number of systems and processes that are included in a typical payments processing ecosystem!
Volante Technologies has been deeply involved in financial message integration since 2001, and ISO 20022 migration and integration is a major focus for us. We invite you to download our White Paper entitled ‘ISO 20022 – A simple guide to a complex subject’ and hope you find it a useful resource.