In January 2022, following an industry consultation, the Bank of England announced a revised timetable for the implementation of the Real-Time Gross Settlement (RTGS) Renewal Programme. The revised timeline maintains the move to ISO 20022 messaging in Spring 2023, but instead of a two-stage process with the first in June 2022 and the second in February 2023, it will now be undertaken in a single stage in April 2023. This process will enable banks to gain deeper customer insight via standardization of messaging and data enrichment. Messages related to other RTGS services will migrate in spring 2024.
With the recent developments in modernizing infrastructures and digital evolution of payments with the PSD2 and open banking, data has become a crucial element in the payments industry. ISO 20022 migration now presents opportunities for payment innovations that take advantage of this digital evolution in data processing that has been evolving over decades.
The more data elements that can be derived in payments transfers, the greater its efficiency. Some of the biggest limitations facing payments transfers in the 1970s, 80s and 90s were storage and speed. Since storage is tied to data size, the lighter the data, the easier it could be for transfers to take place. Fast forward to today and ISO 20022 is at the core of a huge disruption that’s beginning to sweep through banking and payments. By bonding payment data to its message, the construct of a payment has been redefined.
Finding the sweet spot in innovating through ISO 20022 can be found by reducing production and by eliminating a lot of the manual processing and reprocessing. This will yield a notable increase in the delivery speed, which is good for all parties.
Value addition for banks
What this opportunity really represents is the ability to differentiate rather than just a tick-box exercise. Beyond moving a piece of pinned message from point A to point B, this is a chance for banks to integrate into the technical and business processes of their customers, which is where true value and differentiation is created.
Customer business integration
How can ISO 20022 integration benefit the customer end of the cycle? Users will have the option to integrate payments into their business processes instead of having to utilize separate business processes for invoicing, then receiving a payment and finally reconciling that payment. Integration simplifies the process end-to-end.
Every bank is going to be in competition for the same thing with effectively the same standard. That means costs and complexity go down for the end customers. And that is the real payback to the overall industry of modernizing.
Interoperability is also an important feature. Visa and MasterCard are leading the way, having already introduced products that allow for ISO 20022, cross border, and domestic payments. They’re moving card rails towards ISO 20022 compatibility. Additionally, there are even several cryptocurrencies that support ISO 20022 payment applications.
Corporates can view it as a shift in mindset. Gone are the days when banks are selected based on credit, because cheap credit can be found anywhere. What can elevate them from the rest of the pack is the ability to support the transition into the digital future. FIs don’t want a bank that does payments, they want a bank that is an expert in payments, with the freedom to evolve.