ISO 20022 and the US Payments Landscape
SO 20022 adoption is growing globally with major payment market infrastructures replacing legacy schemes or developing new faster payments systems built on the standard. In the U.S., there is a slow, but steady transformation happening. There is increasing integration of ISO 20022 by large corporate end users leveraging the U.S. ACH Network. Recently, The Clearing House launched the new Real Time Payment (RTP) system built on ISO 20022. And the high-value systems of Fedwire and CHIPS will be migrating to the global standard in 2020. These developments offer both opportunities and challenges for the U.S. market.
ISO 20022 Implementation and Adoption
The Adoption Challenge
Although it is generally accepted that the ISO 20022 data standard introduces the advantages of flexibility, depth and quality of information, it does present a significant implementation project for any financial institution. Whether an organization is migrating from a prior standard such as ISO 15022, or a proprietary format, the challenge for implementation remains the same. In outbound messaging, firms need to ensure that clients who receive electronic messages can accept the new message types, otherwise additional translation utilities are required. Adding to the complexity of adoption, in certain processing areas, there is an undefined “coexistence period” in which an institution will have to support both the ISO 20022 and ISO 15022 standards.
Dealing with the multiple “spinning plates” of the ISO 20022 adoption journey
As in any implementation project, operational and technical teams are required for installation, testing, parallel runs, and eventual conversion. Adoption of a new standard requires integration of the new formats into every system affected by the new message format. For those firms utilizing third-party applications, this may require installing more than one instance or a different version of the system. For parallel runs, this puts strain on server capacity as well as on human resources.
The time required also adds to the burden. Time to understand the mapping and integration requirements of the ISO 20022 standard is needed. Systems need to interpret new message types, process the data accordingly, and generate outbound ISO 20022 messages. Operational teams need to ensure that proper processing and accounting updates are being performed based on the new inbound messages. As ISO 20022 tag fields are generally longer, there is also a chance of data loss if incorrectly mapped.
Additional considerations for generating outbound messages to entities such as end-clients and other correspondent institutions unable to process ISO 20022 also apply, meaning a firm may need to “reverse engineer” messages to prior formats for consumption by these parties.
The use of extensions within the ISO 20022 set of messages could eventually lead to multiple versions of a single message type as various issuers may find different uses for the extensible fields which leads to the need for multiple translation developments and intelligent routing based on the message source.
Considering solutions to ease the burden of migration
Many third-party providers have developed ISO 20022-compliant versions of their applications. However, parallel runs would necessitate supporting two versions of the application, further adding to the complexity of the implementation project.
There are integration solution providers that specialize in ISO 20022 conversions but many of these applications, are designed to only map to the new format and do not have the rules-based design capability to meet the demands of complying with multiple standards or to “reverse engineer” the flow of ISO 20022 messages.
Some solutions pertaining to particular ISO 20022 initiatives, such as the Single Euro Payments Area (SEPA), or the EBA Clearing initiative will automate the requirements of these regionally-specific banking initiatives but would not support a global payments provider in generating and receiving payment messages in other markets. There are more than 80 implementations of ISO 20022 across 40 markets areas such as trade finance, cash management, as well as payments. Initiatives such as the CGI-MP not only affect bank-to-bank payments but corporate enterprises as well. There is also a global movement for ISO 20022 transaction-based reporting. The flexibility of ISO 20022 is one of the major reasons for adoption in these markets however, to support the specific requirements of each region, solutions must have inherent flexibility.
Volante’s answer to the adoption challenge – a “standards agnostic” integration tool
The Volante Designer development platform provides a comprehensive financial message and data integration solution across the enterprise. Volante Designer offers a rules-based solution with the flexibility to cater to any external and internal financial message integration requirement. Data from any source and from multiple sources, can be transformed into any format at any destination.
Designer simplifies and accelerates any implementation project involving message complexity, integration and processing. Development times are reduced typically by 60-80%, delivering rapid returns on investment and increased operational efficiency for a significantly lower total cost of ownership.
Due to Volante’s vast maintained standards and transformations library, Volante Designer may be considered as “message standards agnostic” and deploys an “anything in/anything out” approach to message and data translation and integration. Solutions created with Volante Designer can be configured to map any incoming format to the ISO 20022 standard, then reverse-engineer the data back to the original format for outgoing messages and files. In addition, Volante’s canonical model approach persists the data before and after transformation so that even data that may have been lost can still be accessed through Volante’s API and user experience design (UX). Volante has also built interfaces to most of the major financial vendor applications, thereby simplifying and accelerating implementations.
Volante’s familiarity with ISO 20022 implementation projects saw a global financial software provider use Volante Designer to enhance the functionality of its financial messaging solution and introduce far greater agility in its implementations. As a major supplier of payments and financial messaging technology, the client wanted to develop SWIFTNet interface for its own client base. A major requirement was to include validation and transformation of SWIFT FIN and MX (ISO 20022) payment formats and the development of translation libraries for ISO 15022 to ISO 20022 messages for entry and exception management workflows. By adopting Volante Designer with its large library of standards plugins and transformations, and its inherent high degree of automation and configuration rather than coding, the client was able to produce a solution in far less time and cost than alternative approaches.