In the previous two articles in this series, we discussed the disruptions caused by Covid-19 to the payments industry and why banks need to make a significant change in their operations. In this concluding part of the series, we will discuss how these changes will affect financial institutions.

There are many challenges for financial institutions face adopting ISO 20022 will mandate changes to banks’ systems and processes; integration to enterprise systems & applications stack; significant migration and transformation effort


Many financial services institutions (FSI) will need to upgrade the applications that process the ISO 20022 messaging set. In addition, some firms might consider leveraging hybrid (e.g., GPP and Volante) systems to adopt ISO 20022, yet still want to keep their present payment systems in place. Thus, there is an opportunity for hybrid systems to be developed based on older standards, with messaging being transcoded into ISO 20022.

When modernizing payment value chains, applications, processes, operations, and associated services, FSI should seriously consider if cloud/microservices can provide institutions with greater agility and flexibility and the chance to lower costs and the duration of implementations. Utility APIs should be consumed through vendor offerings. Only those that offer true differentiation and can be updated every 2nd year should be developed in-house.

Many institutions will implement translation capabilities from Finacle, Temenos, Volante, Finastra, and Swift to translate from ISO20022/Swift Fin MX to ISO15002/Swift Fin MT and vice-versa through the three-year co-existence phase. However, it is essential to note that these solutions are temporary solutions to help organizations migrate to newer ISO20022 capable applications.

ISO20022 will see a significant transformation in cross-border, high-value payments and real-time gross settlement payment messaging instruction sets. In addition, other changes will be required in the integration, other associated/dependent applications, digital channels, and API/Webservices.

In many instances moving from MT to MX is a complete re-write of your application and its associated processes; use the opportunity to simplify or eliminate any customized processes that are no longer required.

Throughout this transformation, many FSI providers will seek out new intelligence solutions around settlement and automation.

Migration to ISO 20022

Co-existing costs – ensure your business case accounts for the cost of maintaining legacy MT platforms, translating to new MT to ISO20022/MX Standard, and adopting new ISO 20022/MX. In addition, you will need to evaluate the operational impact monitoring of truncated data when translating from MX to MT in the co-existence period.

Some of the other cost inputs you will need to consider include

  • Upgrading enterprise integration, payment, and institutional/corporate banking applications (and/or services) to be able to accept ISO20022 MX messaging natively
  • Building new data warehouse and logical data model to be able to receive MX message
  • Modifying RTGS & RITS messaging to RBA
  • Modifying and testing ability to submit messages to the corresponding bank and associated settlement processes
  • Modify the reporting process/es to/for:
    • Reserve Bank of Australia RTGS AU (RITS based on SWIFT MX)
    • Regulatory bodies including Australian Reserve Bank, ASIC, APRA, AUSTRAC, and Australian financial police.
    • Payments schemes including cards (Visa, Master, Amex), payments providers (EFTPOS, NPP/APCA, Austraclear)
    • Internal operational, governance, fraud management, and risk management
    • Sanctions verification
  • MT to MX translation capabilities in co-existence, financial institutions must process transaction types as correspondence banks and local RTGS and HVPS.

ISO 20022 Change management

Change management needs to be centered around dependent applications, integration processes, and supporting operations.  In the various channel (retail, corporate and institutional banking), there will be many new requirements for data, strategy, integration, etc. In addition, wholesale client channels will have unique needs (e.g., data & reporting required), modification to API, applications fields, and data/reporting provided.

Internal bank staff – client-facing and back-office will need to be familiarized with new procedures, operating requirements, new processes, orientation around new data, and reporting.

Digital applications and API – mobile devices, API/web services/microservices, and web browser applications will undergo an integration change. Still, it is likely a transformation change as the savviest FSIs start to build new products for customer consumption via their digital and self-serve channels.

Exceptions and investigations- To compensate for missing or mismatched fields within the messaging data (often the case, for example, when incoming payments have originated from outside countries or jurisdictions), rules need to be implemented which can overlay the standard processing capabilities and conditions to make these payments compliant and reduce manual intervention.

Data Management, Reporting, and Analytics

The richer ISO20022 data embedded in the ISO20022 payment instruction provides a significantly higher amount of information that will need to be captured in the institution’s data warehouse.  The increased information fidelity needs to be leveraged for risk management, crime management, and sanctions checking.  This increased information also gives rise to the new commercial opportunity for value-added services.  Examples of structured data capture include:

  • Payment purpose codes – standardized method of identifying the purpose (e.g., salary payment, tax payment).
  • Identity information – structured fields identifying originator, beneficiary, enhanced areas for financial intermediaries and agents.
  • Legal entity identifiers (LEIs) – LEIs identify organizations, linking to microservices to get rich information about that entity. LEI microservices can provide significant advantages for identification required to fulfill Know Your Customer (KYC) screening, AML/CTF monitoring, and sanctions screening.
  • Remittance information – ISO 20022 standard offers both a structured way to send remittance information and larger unstructured remittance fields that will spurn new banking products for billing present payment and potentially invoice factoring finance.
  • International Bank Account Number (IBAN) – IBAN is a unique code identifying a customer’s bank account. IBANs are widely used in Europe and growing in use globally, particularly in the Middle East. IBANs improve cross-border payments.

Banks must not view ISO 20022 migration merely as a compliance exercise but think beyond the immediate regulatory mandate and look at unlocking value by leveraging the benefits of ISO 20022.

While immediate benefits may not be present in these Covid-19 times, long-term benefits must be considered if ISO20022/MX enabled valuable retail and commercial clients to prefer banks.

Use the opportunity to simplify and/or eliminate any customized processes or application code that is no longer required when upgrading. For example, many applications code of bolt needed to facilitate core functions (e.g., writing to the general ledger). In addition, significant data management/modeling work is required when adopting ISO20022.

Ensure your migration program budget for the migration, remediation, and run of the new ISO20022 standard.  This program must be implemented with a dedicated team with staff from your Technology, DevOp, operations, and business unit to ensure that the right business capabilities are integrated into an FSI.

While the team is stood up, use the opportunity to upgrade process applications, dependent applications, and API. Companies should not rely on co-existence applications; they are a temporary solution designed to help an organization get to new ISO20022 capability core systems/applications

Lastly, focus on the future and build agility for Innovation as the basis for your business and technical architecture.  Innovation and disruption will “become the new black”, and institutions will need to pivot when the situation or opportunity arises.

David Coli

David Coli

Senior Principal

David Coli has more than 29 years of Experience in Financial Services, Wealth Management, Institutional Banking, Equities/Derivates trading, Cards & Payments, BPO, Digital, Core Applications, Program Delivery, Governance, Insurance, Core Transformation and Service Management. David has held Wealth Distribution/Products, Lending, Credit management, and Corporate Bank roles. He has worked in major companies like EY, Microsoft, SAP, Sun Microsystems/Oracle, PM Partners, Telstra, NSW Police, Asgard Wealth, NAB, and Westpac. Across Industry sector experience includes Financial Services, Digital, Payments, Intelligence & Defence Industries, Law Enforcement/Police, Health Government, Retail and Aviation. In Infosys Consulting David currently focuses on Broad industry initiatives in Payments, Mortgages, Wealth, Digital, channels, product, transformation, and operations. 

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