Managing ISO 20022 Across Jurisdictional Borders

SWIFT has reduced the risk that intermediaries may ‘break the chain’. However different approaches could still lead to a patchwork of regional ISO 20022 dialects.

In March 2020, SWIFT announced that it had decided to push back the rollout of ISO 20022 in correspondent banking by a year. While the end date for the migration remains unchanged at 2025, the MT/MX coexistence period now commences 12 months later, starting in 2022. The shortening of this period from four to three years provides banks with an additional year to prepare for the change. 

The announcement received significant attention – including from the European Central Bank, which deemed SWIFT had insufficiently consulted with them, and expressed concern regarding how this decision would impact its plans to migrate Eurosystem’s RTGS, TARGET2, in November 2021. Although a recent request from the European Banking Federation to push the T2/T2S migration back a year, which highlights the impact of the COVID-19 crisis, appears to be falling on sympathetic ears at the Central Bank, the 2021 date has remained steadfast. 

As much of the media attention has focused on the interactions between SWIFT, the ECB, and banks, an essential element of SWIFT’s March 2020 announcement has remained largely overlooked:

New SWIFT capabilities will maintain complete data and state information for transactions centrally, relieving institutions in a payment processing chain of the obligation to pass on complete data and eliminating the problem that intermediaries may ‘break the chain’.

This might be the most radical shift in SWIFT’s modus operandi since the introduction of gpi – and one that Identitii applauds. Data integrity and not “breaking the chain” has been central to Identitii’s philosophy and value proposition, and one we’ve been proud to share since as early as EBA Day 2019. Our Overlay+ platform enables banks to leverage format translation without the risk of truncation, in much the same way as what SWIFT is proposing in their new platform strategy.

SWIFT adopting this approach will minimise the risk of data loss by correspondents, allowing them to efficiently respect FATF recommendation 16 without requiring them to overhaul their payment processing systems. Beyond the correspondent bank use cases, Overlay+ enables payment processors to easily deploy rich ISO 20022 corporate-to-bank and bank-to corporate messages, and to send payments over alternative payment networks without risking FATF-16 non-compliance.  

However banks should be aware that beyond the guidelines set out by the Financial Action Task Force, many jurisdictions have their own usage rules and information requirements. The clearing and settlement mechanisms in these jurisdictions have different migration timelines and support different fields, leading to a patchwork of regional ISO 20022 dialects.

In order to help banks navigate the migration, we have developed a free-to-use online resource that provides up-to-date country and jurisdictional information in relation to the ISO Migration. The website gives an overview of each country’s migration plans, and when available, information about the usage rules that they will apply.

SWIFT’s delay in the migration of correspondent banking has given banks some additional breathing room when it comes to their ISO programs. However, it should not slow them down and institutions should consider how they can make use of the rich data ISO 20022 enables to optimise their STP capabilities and customer experience. Payment service providers that are capable of fully leveraging ISO 20022 will be capable of not only reducing their processing costs, but of providing rich customer experiences. The migration is not a compliance project, it is an opportunity to be seized. 

Ben Buckingham​

Ben Buckingham is Identitii’s Director of Strategy and Partnerships,  based in Sydney.

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