ISO 20022 causes upheaval in payment traffic

14. July 2023

Globalization – a buzzword that is the subject of controversial debate and whose direct and indirect effects affect us all. No matter what counter-movements have resulted from the crises of recent times, global interconnectedness is a fact of life that is particularly evident in the financial markets. International payment transactions are a decisive criterion for a functioning global economic cycle. Digitalization offers economic participants new, previously unimagined opportunities, but it also shows the limits of the former payment systems. For example, various data formats are currently in use for the exchange of financial and payment data between banks, customers and countries, which no longer meet the requirements of today's economic processes in terms of both the speed of processing and information integrity. But the transition is coming. In November 2023, SEPA will migrate to the ISO 20022 standard – a date that is receiving worldwide attention.

The first steps towards a harmonized international payment traffic started already in 2004 when SWIFT (Society for Worldwide Interbank Financial Telecommunication), a messaging platform for the exchange of information on financial transactions in a standardized form, developed a worldwide standard for the exchange of financial data in XML format (eXtensible Markup Language): ISO 20022. This standard is now being introduced globally in the financial sector with a transition period until 2025. The changeover represents a significant challenge, but the advantages it offers outweigh the disadvantages and are even essential for modern payment transactions. For example, this new format provides all the necessary information to comply with compliance processes or to optimize the user experience.

But what does this mean for companies? According to a study , only 18% of the companies surveyed worldwide are considering a transition, and 42% have no plans at all regarding this drastic transition. However, the fact that the change is coming becomes clear with SWIFT's indication that as of 2025, the previous SWIFT standard MT messages on the SWIFT platform will be decommissioned and banks will be able to demand full ISO 20022 compliance from their corporate customers. Considering the tasks at hand, the transition period is short because each bank uses its own format within the standard to transmit financial data, which in turn is stored in corporate systems. ERP systems, human resources and payroll systems, in-house developed solutions and all systems that contain payment information are affected.

To master the complex and critical task of an end-to-end ISO20022 conversion for companies, precise concepts are required that harmoniously integrate both the requirements and the specific processes and systems of the company, as well as its partners. The benefits of taking this leap into a new form of financial data transfer are already apparent today. Increased efficiency through harmonized and standardized formats, cost reduction through simplified processes and digital compliance by means of meaningful and automated analyses.

ISO 20022 is an opportunity for a solid and future-proof standardization strategy, which offers measurable added value for the company with an experienced partner. PROMATIS, with its business excellence expertise and sophisticated process knowledge, has been internationally active in corporate finance topics for more than 30 years and knows the requirements and problems in this highly sensitive environment. Creative implementation approaches, certified procedures and in-depth IT know-how are hallmarks of this systematic approach and, combined with a high level of customer orientation, result in future-based and reliable applications. In this way, the diverse possibilities of this payment transaction standard can be fully tapped and integrated into corporate structures in a success-oriented way, securing the future for resilience.

1 „Ready or Not, Here it Comes“ / Q4 2022 / Seeburger, Celent:

Author: Sabine Rudolf
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