Is the market ready for the end of the coexistence of ISO and MT messages? What remains to be done in the next few months to realise ISO 20022’s full benefits?
The afternoon session discussing the end of the ISO 20022 coexistence period was moderated by Kjeld Herreman, founding partner at Paylume, and featured a panel of experts including Christopher Gardner, ISO 20022 programme and change execution director at Deutsche Bank; Domenico Scaffidi, market infrastructure advisor - payments innovation, Bank of England, SAP Member, and executive director at Unifits; Justin Brearley-Smith, global product lead at J.P. Morgan; Sylvain Dauge, product manager - cash clearing services at Société Générale; and Vitus Rotzer, chief product officer - financial messaging global at Bottomline.
Herreman began by outlining the specifics of the upcoming ISO 20022 deadline. Highlighting statistics from Swift that forecast 91% readiness by November 2025, as well as a poll to the audience that revealed that 43% of audience members have achieved all outgoing messages in ISO 20022 (interestingly, the next largest answer were the least prepared), he asked the panel about general ISO 20022 readiness across the industry.
Brearley-Smith highlighted: “It certainly seems that our audience here are ahead of the global adoption rates[..], but I honestly think what we'll see is an actual sort of vertical in November with a big bang. We'll probably see some gentle adoption between now and FedWire migration in July, so we'll see the adoption go up. We're at 40% now, so maybe 50, 55%. And then I think we'll plateau before we get to a big bang in November. The reason why I think we'll have this big bang is that we've got another big change coming in in November. It’s not just the end of the [coexistence for] payment messages, but we've got hybrid address coming in as well. So I think for those that aren't sending MX now or mid-July/August, they won't be able to go through two rounds of testing and two big implementations in a short time span.”
The panel highlighted that many organisations will likely rely have to rely on in-flow translation before achieving the ability to go fully native. “It’s a bit like a long weekend that we have in front of us,” Rotzer commented. “Everyone takes the highway and we get a traffic jam with all the projects that are ongoing. [..] The key is engaging and aligning with system providers. Everyone is doing initiation, coming in is not really an issue, but they need to manage it properly within different systems, including subsystems. If you haven’t started yet, you will be late and, at best, tick the box.”
Getting away from translation as quickly as possible is important to achieve the full benefits of ISO 20022, yet Scaffidi emphasised that not all organisations have the resources to effectively go ISO-native. The Swift numbers “are coming from 175 banks, but what about the other 2000 financal institutions that are medium and small? They do not have the resources to afford the proper migration with all the value that we are discussing today. So there is another important risk that we need to take into account, which is systemic risk.”
A second audience poll revealed that 60% of organisations in attendance were opting for a fully native approach, 23% were relying on a mix between being ISO native and relying on translation, and 18% were primarily relying on translation.
“It’s really positive to see the native processing,” Gardner stated. “But I understand the need and necessity for some organisations to use translation depending on the complexity of the architecture.” He continued that as more payment market infrastructures require structural remittance information (e.g., Fedwire with the tax IDs for IRS payments), banks can only meet this demand if they have this information coming in to them as well.
Importantly, this upcoming November deadline is just the start of the journey, with Brearley-Smith equating ISO 20022 as the first movie of a blockbuster franchise. He expects reporting and advising to be the next migration priority, with case and enquiry investigation being another crucial aspect.
“It’s worth highlighting that the complexities with some of those sequels is not to be underestimated,” Gardner added. “Case management, for example, isn't like payment messages, where we have just a change of message type and data. This is a holistic change to how the industry is reporting the management of investigations and exceptions. So I ask everyone: Please be working on this now, because it's not going to be long until this comes in.”
The panellists additionally highlighted the importance of engaging corporates, and emphasising that a failure to “produce the use cases for corporates is a failure of migration.” Ultimately, standardisation and richer data will have benefits for the entire industry, however, that is only achievable if the migration is tackled holistically rather than as a tick-box exercise.