The New Way of Payment Transactions

01.08.2024

ISO 20022: Efficient Banking Communication and Cross-Border Payments

This new ISO standard is an international standard for the exchange of financial data, providing a uniform structure for messages related to payments, securities transactions, and other financial services.

What is ISO 20022?

ISO 20022 is an international messaging standard in the banking and financial industry that facilitates the exchange of structured and data-rich information between businesses and banks. This standard plays a crucial role in modernizing payment processes, offering multiple benefits. ISO 20022 messages use a unified language that is understood globally, supporting the automation of transaction processing and reducing manual interventions. The standard enables detailed information about payments as well as remittance data, which helps financial institutions offer new services and enhance analytical capabilities.

What is the significance of ISO 20022?

ISO 20022 is used in more than 70 countries and affects payments, securities, trade services, cards, and foreign exchange. Both the Fedwire Funds Service of the Federal Reserve and the Clearing House Interbank Payments System (CHIPS) are developing and planning the implementation of ISO 20022 in their systems. The transition period to ISO 20022 ends in November 2025, after which SWIFT MT messages will be discontinued.

Timing of ISO 20022

What is new about ISO 20022?

Compared to previous standards such as SWIFT MT, ISO 20022 offers more extensive data transmission capabilities in a simpler XML format, which reduces costs.

What needs to be considered when implementing ISO 20022?

Challenges in migrating to ISO 20022 include technical adjustments to new payment carrier formats, account statements, converters, and data mapping, interoperability, required training and coordination, and risk and project management for the transition.

Why is the transition to ISO 20022 so important?

Globally, ISO 20022 will be adopted for cross-border payments by 2025. ISO 20022 supports regulatory and compliance requirements through improved transparency and efficiency in data transmission. Real-world applications include payments to suppliers, fund disbursements, electronic invoicing, and automatic reconciliation of historical payments. ISO 20022's main features include a comprehensive standard, the use of XML technologies, a modeling methodology, and central dictionary and design rules for message models. Banks support customers in transitioning to ISO 20022 through communication, training, customer support, and testing opportunities. The security of your data is ensured by standards such as ISO/IEC 27001 and ISO/IEC 27002.

Overall, ISO 20022 plays a significant role in international payment transactions by providing richer data, interoperability, and improved tracking and reconciliation of payments.

Start evaluating your systems, training your staff, and implementing necessary adjustments today to fully benefit from this standard. A timely transition will not only increase your efficiency but also enhance your competitiveness. XEPTUM, as an experienced consultant, offers you support.

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