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21 July 2020 5 min read

The ISO 20022 adoption dominoes – Covid-19 broke the chain, can the industry now rebuild it?

Ben Matthews

Ben Matthews
Partner | Financial services | London

Ilkka Ristimaki

Ilkka Ristimaki
Partner | Financial services | London

We recently hosted the second of our ISO 20022 virtual round-table meetings, with representatives from global transaction banks and the industry. The objectives of the discussion were twofold:  

  1. to take stock of the Covid-19 business context and recent announcement from SWIFT  

  1. to consider their implications on ISO 20022 migration and previously published timelines.   

Here we share with you the key themes and recommendations from the discussion. 

Taking stock 

Winding back to the beginning of 2020, the global payments industry was entering a new year with high hopes of real progress towards building richer and more relevant client centric solutions, many of which would be enabled through adoption of ISO 20022.  

An increasing number of clearing systems and infrastructure providers had been lined up in an orderly and ever lengthening chain of ‘dominos’. Expectations for the ensuing chain reaction to deliver the long awaited global message standard harmonisation were rising. 

Then Covid-19 hit. The previously orderly dominos started to move, breaking the smooth chain that the industry had put so much effort into constructing. First, SWIFT announced a one-year delay to the ISO 20022 migration date of cross border payments to November 2022. According to SWIFT this is to allow them to bring their new Transaction Management Platform to market ahead of the migration date. Subsequently a number of European banking industry bodies have written to the European Central Bank to request a one-year delay to the T2-T2S consolidation project, to align also with November 2022. Suddenly many of these plans were unexpectedly needing to be re-written, in an environment of huge uncertainty.   

The implications 

The delays will impact different institutions in different ways, some maybe delighted at being given more time to prepare, others rue the additional complexity (and cost) they have to deal with as a result and those who have well defined ISO roadmaps may see this as a real threat to the deployment of new innovations and capability. It is fair to say we had representatives at the working group from all three camps! 

With SWIFT (and the Fed) now delaying any implementation until 2022, the immediate challenge is to re-evaluate existing plans and re-establish the orderly chain of migrations. One approach discussed was focusing on ‘corridors of value’. For example, whether USD-to-EUR, EUR-to-RMB or GBP-to-EUR. We discussed how it is useful to:  

  1. consider each ‘corridor’ separately 

  1. assess the market infrastructure necessary 

  1. map out a transition pathway based on these, and also 

  1. tap into the progress and thinking from the international ISO adoption push. 

Recommendations 

In many ways, the re-adjustment of a timeline is always a good prompt to consider again the original objectives of an endeavour so let’s remember what ISO is all about:  

  • richer data 

  • flexibility 

  • efficiency 

  • resultant ability to reduce cost whilst offering more relevant insight to customers.  

The working group has consistently reflected on the need to put customer and client needs first and not just talk in complex, jargon heavy regulatory terms. There is a real desire to do things differently and think ‘client’ at each step.  

Given the investment that firms across the industry are making, there is a strong desire to ensure that value is returned. For this to occur, it is critical to re-focus any planning and prioritisation to ensure that the customer outcomes are clearly understood and delivered through the adoption of ISO.  

As financial institutions continue migration planning, in a more uncertain Covid impacted world – and start developing the new propositions and services – it is important for firms (and regulators) to continue to focus on the enhanced experience ISO 20022 can enable and the new and improved propositions they are looking to deliver for their clients. 

Despite the hiatus in plans and uncertainty from Covid-19, there was a strong desire from the group to continue to talk and share experiences where these are in the interests of the industry at large, that result in a better, more client-focused set of outcomes once plans are back on track. 

Our working group is made up of payments industry leaders across international transaction banking institutions who meet to discuss strategic opportunities and challenges for ISO 20022. Under Chatham House rules, it provides the opportunity to share perspectives and ideas freely with peers.  

If you would like to take part in the third in the series (our late summer working group) or you want to discuss any of the points raised in this article in more detail, please contact Ben Matthews or Ilkka Ristimaki.

About the authors:

Ben Matthews is a Partner in the Financial Services practice and Global Transaction Banking and Payments lead.  

Ilkka Ristimaki is a Financial Services Partner with a focus on technology across insurance, banking and capital markets