What is ISO 20022 and How is it Changing in 2022?

A new era for banks and financial institutions is drawing near, as they prepare to transition their payments systems from using the legacy SWIFT messaging standard for high-value payments to the all-new ISO 20022 standard.

SWIFT claims that ISO 20022 will “unlock huge opportunities for financial institutions, such as boosting operational efficiency, enhancing customer experience, and enabling innovative new services.”

For high-value payments, ISO 2022 will improve client experience, drive operational efficiencies and reduce both costs and risks - all by significantly improving the quality of data exchanged across the payment ecosystem. 

But what actually is ISO 20022 and how is it changing in 2022? We answer all of your questions in this blog. 

What is ISO 20022?

First introduced in 2014, ISO 20022 was created to give the financial industry a common platform for developing messaging. To do this, ISO 20022 uses a modeling methodology, a central dictionary and a set of XML and ASN.1 protocols. 

According to SWIFT: “ISO 20022 is an open global standard for financial information. It provides consistent, rich and structured data that can be used for every kind of financial business transaction.”

It is expected that, by 2025, ISO 20022 will be the universal standard for high-value payment systems of all reserve currencies, and will support 80 percent of transaction volumes and 87 percent of transaction value globally.

SWIFT is driving financial institutions to ISO 2022 in an effort to dramatically improve the quality of data exchanged across the payment ecosystem, with richer, structured data enabling new efficiencies for processing, compliance, improved insights and new features that can be used to improve client experiences. 

How ISO 20022 will make payment testing easier 

Despite the existence of various national, regional and international standards, many financial institutions have interpreted, developed, and implemented their own flavors of these standards, resulting in the complex web of legacy payment interfaces that exists today.

This vast array of “standards” makes it difficult for QA teams, testers and IT departments to handle onboarding, payment testing and managing ongoing partner relationships. 

The migration to ISO 20022 will change that. While there will no doubt be some challenges and teething pain during the migration to ISO 20022, the new standard will provide a messaging framework that allows for financial information to be seamlessly shared on a global basis. 

What other benefits come with ISO 20022?

In addition to making it easier for financial institutions to conduct payment testing, ISO 20022 will also bring a variety of further benefits, including:

• Better integration and compliance
• Richer, more granular data
• Better transparency and visibility
• Regulatory and security enhancements
• The ability to capture more data provides opportunities for new revenue streams

More than 70 countries have already adopted ISO 20022 in their payments systems, including Switzerland, China, India and Japan. 

As more financial institutions send and receive ISO 2022-enabled payments, they'll be able to benefit from fewer processing exceptions that create delays, provide better customer experience and deliver new, innovative services. 

Benefits will also be extended to corporate customers of banks on the retail side. They’ll benefit from simpler matching of invoices to payments, a longer term reduction in costs, reduced operational and compliance risks and the ability to use rich data to offer new value-add services.

It is important to note that while the current focus is on the high-value payment infrastructure, ISO 20022 applies to retail payments and ATM transactions as well. It won’t be long before we start to see formal plans to migrate legacy ISO 8583 interfaces to the new standard.

Are you interested in learning more about how you can improve your testing processes to better prepare your organization for the migration to ISO 20022? Get in touch with Paragon Application Systems today. 

We’ve designed a series of advanced payment testing software specifically for the payments industry that improves the quality, efficiency and productivity of your payments testing environment - allowing you to provide a superior customer experience.