The uptake of ISO 20022 so far...

ISO 20022 is inevitable, but to misquote Jake Butler “there is no arguing with the inevitability but not all need pay it heed”.

There are thousands upon thousands of search engine results that will offer you an opinion on ISO 20022 and its importance to not only the financial services sector, but to the global economy as a whole.  The benefits of the new message standard are lauded by SWIFT, the ECB, The US Federal Reserve and many others.  ISO  20022 has been positioned as creating greater transparency, reducing friction and delivering new business opportunities for every organisation engaged in the process of managing a payment – especially so when that payment is cross border. However, despite the enthusiasm and clear benefits, the journey toward universal adoption has been marked by inconsistency and varied levels of preparedness across the industry.

With the 2025 deadline drawing near, the disparity in readiness among financial institutions is evident across the industry.  Given that the publishing of the original SWIFT message format and the overall intent to drive change occurred almost 15 years ago now, it seems incredible that the initiative is both seen as “new” and so far from wholesale adoption. It would be overly simplistic to be critical of the industry, or of individual institutions, but as with all major payment initiatives there are core factors that have driven behaviour.  Broadly, the responses of affected organisations can be described in one of three ways:

Those who see this as a strategic commercial opportunity

From the outset, these companies saw ISO 20022 not as a format, but as the basis on which the bank’s new payment infrastructure should be built. The vision was to reengineer, in parallel creating a platform for new services, functions and features to steal a march on competitors. JPMC has made it known that 100% of all relevant transactions are now processed in native ISO 20022 format.  Some observers claim the drive is purely down to ‘the need to lead’, but whatever the driver, the bank has clearly set the bar for wholesale acceptance.

Those who see the exercise purely from a compliance perspective

Financial institutions have been clear for some time that being compliant was not optional. If an institution did not recognise the programme as a major commercial opportunity, or perhaps saw the opportunity but were unable to manage the scale of change required, then compliance became the driver. The problem with this approach is that it renders the change a “grudge purchase” which joins the queue of constant change that needs to be accommodated in the compliance workload of a payments team.

Those who hope it might be delayed again

When a programme has seen so many dates slip over an extended period, it is tempting to believe that in itself is a constant and that if one hangs around long enough, another date will come along.  Whilst clearly not the best strategy, it is hard to argue against for organisations who are stretched to maintain today’s business as usual, let alone deliver the future. Many in this space felt that they could manage their situation by using message mappers and masks if necessary, but it is clear that the system is not going to permit that and the end to end format needs to be ISO 20022 irrespective of originator, correspondent or recipient.

Where does that leave us?

The simple fact is that many organisations are far from ready for the change. Institutions are developing plans, and beginning processes, but often lack the core skills and knowledge to deliver.  "The potential of having a common messaging standard for finance globally is huge, but it's still not well understood by many at this point," said Booshan Rengachari, Founder and CEO of Finzly.

Roq knows from its own experience working within one of the largest RTGS programmes in Europe, that it is vital to have good understanding of the format and how it can be utilised to ensure quality and avoid errors. This is hard to achieve when skills are in short supply, but is quite evidently non-negotiable.

Being critical of those now facing the realisation that time is short would be easy, but one should see this in the context of the scale of compliance and change a bank has to manage.  The ‘super banks’ can make the decision to reengineer their entire institution and commit the money and resources to achieve this; for many though, this is just not feasible.

Around 40% of U.S. financial institutions — particularly smaller financial institutions and community banks — are behind on their preparations, according to industry experts (American Banker). About one in four U.S. banks hope to comply with the standard by October 2025, and about 10% have no specific time frame set for ISO 20022 compliance, KPMG said in a recent report, based on a survey of 200 U.S. banks in October 2023.

Let us rightly laud those that have achieved holistic change, but let us also not assume that this should imply criticism of those who have not been in possession of the means to achieve it. Instead perhaps we as an industry need to draw together to ensure success for both the programme and every institution that forms part of it. The success of this vital change will come from the whole industry achieving success together, not through individual pockets of success achieved by individual banks.

The challenges are numerous, encompassing the scarcity of specialised skills, the enormity of technological and procedural overhaul required, and the significant investment in resources. However, Roq feels strongly that we have a collective responsibility to deliver the end to end environment mandated. Our skilled people, and experience at the heart of the RTGS programme, positions us as a valuable partner for institutions struggling with this transformation.

We are ready to help organisations who need specialist help to rapidly develop QE/QA programmes to meet their obligations and ensure they are prepared for the 2025 deadline. If you have any questions about ISO 20022, or need help with your organisation's migration to the new standard, please reach out to us here or via email.