Payments Testing - March 19, 2024
As the global appetite for electronic payments of all kinds has continued to grow, the network of institutions, organizations and yes, standards, used to support the flow of transactions has evolved to be incredibly complex.
There is both a desire and need to look at new ways to modernize, streamline and simplify payment processing. At the same time, there is a need for payment transactions to be faster, more secure and provide a richer data stream.
The ISO 20022 standard for financial message processing has been around since 2004, and much has been written over the past 20 years about the need for such a unifying standard and the value that it will bring to financial services providers that process any type of payment.
Across the globe there have been a number of initiatives started by central banks, payment networks and other processors that seek to take advantage of the capabilities offered by ISO 20022. Perhaps the most significant of these projects is the decision by major central banks and SWIFT (Society for Worldwide Interbank Financial Telecommunication) to collectively migrate to ISO 20022.
SWIFT is the biggest financial messaging system in the world, including 11,000 member financial institutions, processing more than 42 million high value transactions every day with a combined value of more than 5 trillion US dollars.
So there is clearly a lot at stake here for SWIFT, as well as all its partners and members. The overall goal is to use ISO 20022 and its structured and data-rich common language to speed-up, expand and streamline transaction processing for both financial institutions and their corporate clients.
As one might imagine, an undertaking of this size and scope has generated a lot of interest and scrutiny. In mid-2022, Celent conducted its “ISO 20022 Readiness Survey” to document and analyze the progress of these organizations against the migration targets established by SWIFT.
Surprisingly, less than 75 percent of the organizations participating in the survey indicated that they will be fully ready by the current November 2025 deadline. In Europe, a hotbed of 20022 activity, the number is less than 70 percent, in North America, less than 60 percent.
The survey highlights that even with a long runway and a significant payoff at the end of the road, many organizations will still not be ready to take advantage of the benefits and improved customer services that ISO 20022 will provide.
For those of us focused on the retail payment space, we think the key message here is to get started on your journey early.
It’s Time to Start your Migration Planning Now
Whether you are an innovator looking to be an early adopter of ISO 20022 for retail payments, a “fast follower” or even plan to be part of the “late majority”, it’s not too early to start planning for your eventual migration..
Based on our nearly 30 years of experience working on implementation projects like this, we’ve listed some steps to get you started on this journey and help make your eventual migration a success.
Step 1: Familiarize yourself with the standard
It is important that your organization gains a thorough understanding of the new standard, its business rules and processes. For financial service organizations used to working with ISO 8583 messages, migrating to ISO 20022 will have a significant impact on your operations.
Step 2: Assess your current systems and processes
Determine how your current systems and processes align with the requirements of ISO 20022. This will help you identify any gaps or areas that need to be updated to comply with the standard. Ensure that you have a payment testing solution in place that will allow you to perform efficient and accurate payment testing.
Step 3: Develop a roadmap for implementation
Once you have assessed your current systems and processes, develop a roadmap for implementing the necessary changes to comply with ISO 20022. This roadmap should outline the steps you need to take, the resources required, and the timeline for implementation.
Step 4: Train your staff
Ensure that your team members are trained on the ISO 20022 standard and how to use, and test, it effectively. This will help them understand the importance of the standard and how it impacts their work.
Step 5: Test your systems
Before you fully implement ISO 20022, it's important to test your systems to ensure that they are functioning properly and that all the required messages and transactions are being processed correctly.
There is little doubt that the migration journey toward ISO 20022 for retail payments will be long and arduous. However, getting an early start and working with experienced partners will go a long way to making your transition a success. Automating as much of your testing as possible today will deliver immediate benefit and position you for a successful migration to ISO 20022 in the future.
Interested in learning more about what you need to migrate to ISO 20022, and how Paragon’s innovative payment testing solutions can help? Request a consultation with our team of payment industry testing experts today.
