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.

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, says Deutsche Bank’s “Ultimate guide to ISO 20022 migration”.

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 will all modernise their High Value Payment Systems, almost simultaneously, underpinned by the migration to ISO 20022. SWIFT will also 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).

“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 Christian Westerhaus, Head of Cash Products, Cash Management, Deutsche Bank GTB. “However, 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. This 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.

“Given the effort required, it is understandable that some banks may look for shorter migration journeys. On the face of it, maintaining existing systems and converting existing formats into ISO 20022 or vice-versa, either at the inlet or outlet of the payments processing system, or at the interface, could make sense,” says Paula Roels, Head of Market Infrastructure & Industry Initiatives, Deutsche Bank. “But, not only do you risk losing information this way, you almost certainly miss a fantastic opportunity to improve efficiency and client service.”

The guide concludes that acting as a “first mover” could also result in a competitive advantage – realising the benefits of harmonised standards and payments efficiency ahead of time, while amortising the required investment.Given this, any migration project will require CEO commitment, and allocation of appropriate budgets, resources and project teams.