It’s all the rage, but fear not: SWIFT’s financial messaging standard ISO 20022 isn’t quite as difficult as it appears.
Let’s begin by imagining it this way.
It’s simple to become perplexed when individuals communicate. The meanings of words might be misunderstood or simply lost in translation.
Take, for example, football. Football in the United States is quite different from football in the United Kingdom. Even though Americans and Brits speak a nearly identical language, they will never agree on football rules.
In the worlds of money and business, it’s no different, only the stakes are considerably larger. When organisations are unable to communicate with one another, problems arise. This is where the ISO 20022 standard comes into play.
What is ISO 20022?
ISO 20022 (pronounced ‘ISO twenty-oh-twenty-two’) is a global standard for sending and receiving electronic messages between financial organisations.
The International Organization for Standardization (ISO) first launched it in 2004 to provide the financial industry with a standard platform for producing messages using a single eXtensible Markup Language (XML) rule.
Why is ISO 20022 so important?
Within the current financial landscape, there are multiple communications standards and formats, much like there are different languages around the world, each relevant to their respective geographies or business segments.
To put it another way, there are a million ways to communicate the same thing.
In an increasingly globalised world, it’s more important than ever to utilise a common standard as fintechs and challenger banks continue to innovate, bringing new ways to pay.
To help realise end-to-end processing across domains and locations, the language used by new systems and traditional infrastructure must be synchronised.
As a result, ISO 20022 sets out to determine how implementing a worldwide financial communications standard will:
- Improve your communication skills.
- Make sense of a variety of meanings
- Ensure that everyone is on the same page.
ISO 20022 overcomes two barriers in order to achieve each of these objectives:
- Syntax is the structure and form of a message, or its language.
- The meaning of those communications is known as semantics.
Currently, Ripple (XRP) and Stellar lumens (XLM) are the only two cryptocurrency companies to comply with the new standards and serve as members of the ISO 20022 management group. Other cryptos that become ISO compliant will benefit greatly.
Starting in November 2022, the way the SWIFT community exchanges payments messages will be transformed with ISO 20022. This will unlock huge opportunities for financial institutions, such as boosting operational efficiency, enhancing customer experience, and enabling innovative new services.
A global and open standard, ISO 20022 creates a common language for payments worldwide. And its higher quality data means better, faster, and cheaper payments for all.
ISO 20022’s Place in the UK Payments Landscape
The move to ISO 20022 is increasingly on the minds of UK firms!
In June 2018, the Bank of England, Pay.UK and the Payment Systems Regulator issued a statement which accompanied proposals for introducing ISO 20022 compliant messaging to payments in the UK:
“By working together as an industry, we can safely deliver a complex but critically important and highly beneficial change, which will help create the conditions for the next generation of innovation in UK payments.” – Bank of England
On 8th November 2018, the Bank of England and Pay.UK announced the creation of the Standards Advisory Panel, a senior group providing strategic advice on the adoption of new payments standards in the UK, with an immediate focus on ISO 20022.
To Summarise…
Standardising financial messaging through ISO 20022 offers a common, global language for corporates and financial institutions.
Eventually, standardisation will lead to enriched data carried in payments messages to enhance analytics, improve compatibility and compliance across technology platforms, improve fraud prevention measures and create opportunities for collaboration. The goal being that all and any financial transactions (domestic and international) will be as fast, as cheap, as efficient, as easy and fuss free as sending an email.
online sources: swift.com, accesspay.com All opinions and views expressed or suggested by the Digital Zeitgeist are not necessarily the same opinions and views held by or suggested by GPM-Invest plus any and all partners, affiliates, parties, or third parties of GPM-Invest. Any type of media distributed by GPM-Invest IS NOT financial advice. Please seek advice from a professional financial advisor.