Sylvie Boucheron-Saunier is the is chief revenue officer of Finastra, a global provider of financial software applications and marketplaces. She is based in Naples, Florida, for the London-based company.

The clock is ticking for U.S. financial institutions to adopt ISO 20022 payment standardization.

ISO 20022 is a global, universal financial industry messaging standard designed to provide a common message development platform and improve communication between financial institutions, their clients and domestic and international market infrastructures.

Financial institutions must enable their payment systems and any other connected back-office systems processing Swift financial messages for ISO 20022, or implement a permanent translation solution, no later than November 2025. While this requirement may seem like a burden to bank operations, leaders should focus on the opportunities and advantages that come with embracing the new standard, and begin integration sooner rather than later.

Delaying adoption of ISO 20022 can make the integration process longer and more difficult. Older, less efficient systems can slow down transaction processing, increase operational costs and result in greater susceptibility to errors. And with regulatory bodies worldwide mandating the adoption of ISO 20022, FIs that hold off on implementation risk non-compliance with regulatory standards, potentially leading to penalties, fines and reputational damage.

But adopting ISO 20022 isn’t only about avoiding negative consequences. ISO 20022’s rich, structured and scalable messages will give financial institutions a clearer understanding of payment activity, reducing investigations and supply chain risk while increasing productivity and customer satisfaction.

The new standard also supports faster allocation and reconciliation of incoming payments, enables FIs to develop more personalized services, and creates opportunities to increase monetization via forecasting, action-based reporting and data services. Finally, FIs that have adopted ISO 20022 are better equipped to leverage cross-border payments, which can be an important profit center.

While implementing ISO 20022 offers a variety of opportunities and advantages to FIs, making the transition is not without challenges. Many FIs’ current systems are unsuited for rich data formats or don’t allow the use of a translating tool. Most FIs will need to take steps to prepare for adoption.

Those steps include ensuring systems and operations that interface with payments, such as anti-money laundering solutions and core banking systems, are equipped to handle additional data volume. Another step requires updating legacy technology systems and replacing components that are not compatible with XML. Finally, there should be an assessment of data sourcing requirements and the readiness of source systems, and the scaling up of underlying hardware as needed to process larger messages.

When it comes to remaining competitive in the global financial marketplace, adopting ISO 20022 is a necessity, not an option. In addition to avoiding fines and penalties, financial institutions that embrace the new standard promptly can unlock opportunities to drive payments innovation and enhance business value.

By Sylvie Boucheron-Saunier on April 26, 2024
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