The decision by major central banks and SWIFT to migrate to ISO 20022 is an opportunity for banks and corporates to improve operational efficiency and reassess existing business models but will require CEO commitment and allocation of appropriate budgets, feels Deutsche Bank.
The bank, which brought out a whitepaper titled ‘Ultimate guide to ISO 20022 migration’, says the migration to the ISO 20022 messaging standard promises greater interoperability between various settlement networks and will enable the transmission of far richer payments data, bringing higher levels of straight-through processing and more efficient compliance processes.
Over the next five years, the Federal Reserve and The Clearing House in the US, Eurosystem and EBA Clearing in Europe, and the Bank of England’s real-time gross settlement service are expected to modernize their High Value Payment Systems, almost simultaneously, underpinned by the migration to ISO 20022. SWIFT also will introduce ISO 20022 for cross-border payments, with a view to phasing out existing payment messages – making the migration the most impactful payments industry undertaking since the introduction of the Single Euro Payments Area (SEPA).
According to Christian Westerhaus, head, Cash Products, Cash Management at Deutsche Bank GTB, treating this as just another IT project would be a mistake. “It is game-changing and signifies an opportunity for banks and corporates to improve operational efficiency and reassess existing business models,” says he. But he cautions that making the most of ISO 20022 requires a significant and complex migration, affecting not just core payments processing, but many other banking systems and departments.
ISO 20022 migration is not mandatory from a regulatory perspective, but those that do not act now risk being excluded from international payment systems. The whitepaper, a first edition of the guide, which has been produced in collaboration with PPI and focuses on the banking implications, strongly recommends banks carry out a strategic review of all internal information flows to best prepare for meeting the challenges of any future regulatory requirements. Moreover, individual characteristics of different regional ISO 20022 migration projects also have to be taken into consideration.
